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MORTGAGE UPDATE: Why fixed is the new black

In the wake of the general election becoming a three-party race, there have been some interesting movements in the mortgage and property markets, as Andrew Montlake explains.

Inflation has risen more than expected, once again starting whispers around Bank Base Rate rises sooner than expected, though it still looks as though the fragile state of the recovery will keep these at bay for the time being.

The latest GDP figures showed a small improvement of 0.2% growth last quarter, although this is once again probably going to be revised upwards towards the expected 0.4% figure in due course. The election will be key in terms of deciding the timing of the next interest rate move, and there is much to play for.

Competition in the mortgage market is equally rife. With a real possibility that rates will increase by at least 0.5% in the next two years, fixes are once again gaining in popularity. The  Woolwich, among others, has launched some excellent new rates, with the difference between its two-year fixed rate deal and two-year tracker now only 0.5%.

With three-year fixes across the board again under 4% and five-year fixes around 4.5%, many homeowners on trackers are beginning to think that they should quit while they are ahead and lock in.

Meanwhile, there is some good news for first-time buyers as both Newcastle and Abbey have released some additional products at 90% loan to value, so look out for some further welcome competition at this level.

Click here for the best buy deals of the week.

Andrew Montlake is communications director at Coreco.

 

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