Inflation remains low but MPC reluctance to cut interest rates lifts fixes

Some fixed rates competitive, but short-lived so borrowers should act quickly

John Charcol Comment and best buys Katie Tucker of John Charcol comments, "Yesterday's quarterly inflation report showed that CPI held at 1.8% and RPI fell from 4.1% to 3.9%, which would normally be reason to believe the economy could be gently slowing for the second consecutive quarter.

However, the minutes from October's MPC meeting (released today) show that eight out of the nine members voted for a hold - indicating that they felt the economy is not slowing at a sufficient enough pace to warrant a rate cut just yet.

Although the movement in interest rates over the next two years is expected to be generally downward, the eight to one vote suggests this is unlikely to happen for a few months yet.

Coupled with the fact that two-year swap rates closed at 5.91% on Tuesday, up 0.14% from two weeks previously, means we're unlikely to see a fall in fixed rates over the short term.

Competitive rates are being issued and withdrawn quickly, so we would urge anyone currently looking for the security of a fix to act swiftly and snap up remaining deals before they disappear." What is available for borrowers now? Tucker continues: "Last week's chart topping mortgage rates (at Woolwich and Darlington) were used up in days, and the same should be expected of the new ones from The Abbey and Chelsea.

The Abbey's two year rate of 5.58% is fixed until 02/01/10 and available up to 80% loan-to-value, for a ?995 fee which can be added to the loan.

It also comes with a free valuation and legals for remortgages, making it an easy switch for many borrowers who are coming to the end of their old fixed rates now.

It is also flexible, allowing overpayments, underpayments and payment holidays for people who want to be able to put in ad hoc commission or bonuses to build up a reserve, and then use that money to their advantage later.

Chelsea has released a very low fixed rate at 4.99% which would suit borrowers whose priority is to keep the monthly payments low by loading their outgoing at the beginning, by paying a premium fee of 2.5% to secure that rate, particularly as the fee can be added to the loan.

"For borrowers who wish to take advantage of any possible fall in Bank rate in the next two years Halifax is offering a discount of 0.11 under base giving a pay rate of 5.64%, for what is now a relatively small fee of ?499.

Halifax also doesn't charge an exit fee, which means that borrowers are potentially saving around £180* at the end of the loan too.

Saffron's two year discount of 2.40% from its SVR giving a pay rate of 5.19% has no Early Repayment Charges so is ideal for borrowers who want to remortgage to a better rate now, whilst being free to remortgage to a fixed rate even within the next two years." Please see attached best buy table for full product information.

Borrowers should contact 0800 71 81 91 for full product advice.

*£180 calculated as average of other exit fees charged by this week's best buy lenders who levy a charge.

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