What next for mortgage rates?

RenovationMan

Interesting article about mortgage interest rates:

Are mortgage rates about to rise or fall and should you take a fixed or tracker rate? Simon Lambert rounds up the latest predictions, tips, analysis and the best mortgage rates


Rising slowly: The market outlook for rates published by Bank of England MPC member David Miles


The outlook for rates

Mortgage rates have inched up after hitting record low levels at the end of summer, and with warnings of a fresh credit crunch increasing, borrowers may like to consider whether now is the time to make their move.
The main move has come for tracker mortgages, with fixed rates still low.


The poor economic outlook saw mortgage rates take a tumble over late spring and summer, as the prospect of the base rate rising got pushed further back.

However, fresh fears over banks' liquidity in the face of the eurozone crisis have bumped up money market funding costs and fed through to a slight rise in rates. That comes despite the arrival of rate rises still remaining a long way away, according to the markets [See chart above]


The best deals still remain historically cheap, though. Five-year fixes are available below 3.5 per cent and lifetime trackers at below 3 per cent.


Borrowers angling for a new mortgage may like to consider snapping a deal up, if they feel they will be disappointed if rates head north again.


Certainly, those on standard variable rates of 4 per cent or higher with reasonable equity in their home should seriously consider moving to a fee-free, early repayment charge free, life-time tracker. This could shave a decent amount off their monthly repayments and ensure their rate will only rise when base rate does.


(Unlike standard variable rates, which are at the mercy of bank's whims, trackers will only move up if the base rate rises.)


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At This is Money we favour five-year fixes and lifetime trackers over two or three year deals. The first give a good rate and security over a medium term period for those who want it, the second should allow borrowers to leave without incurring early repayment charges.


By contrast two or three year deals have slightly lower rates but will incur more remortgage fees and require borrowers to be looking around for a new mortgage just as rates may be starting to rise.


For now a decent gap between a top five-year fix and a best lifetime tracker remains: the former can be had at about 3.4 per cent and the latter at about 2.5 per cent. That gap is the price of security and on a £150,000 mortgage it equates to almost £75 per month.


These five-year fixes are cheap money locked in for a decent term and very tempting, but make sure you read the smallprint and compare costs including fees to see what is best for you


Read more: http://www.thisismoney.co.uk/money/mortgageshome/article-1687576/What-mortgage-rates.html#ixzz1gsEaOkTq