Intrest rates to fall this year?

Dunkyboy_2

I was thinking of going for a fixed rate with my Mortgage provider (Nationwide) when my current tracker runs out (June 2005), but i'm having second thoughts, my feeling is that the BoE base rate has stayed the same again, also the whole borrowing/Credit card market is under intense pressure from various government departments over mis-selling and Credit card firms throwing money at people who can't afford to pay it back which has attracted a lot of negative press , the house market has slowed considerably as first time buyers find it impossible to get onto the property ladder, we have seen a big slow down of trade in the High Street since Christmas , with the biggest of stores reporting little or no growth, and the forecasts don't show much improvement, so with time running out to pick a new deal, i'm now leaning towards a tracker as i feel that the BoE rate will fall later this year, not by much, just 0.25%, this would allow a little bit of breathing space, and allow the BoE to see how the market reacts.
Your thoughts please....

MrsAk_2

I am of the same view and am in the process of taking a tracker out myself - in the hope that once rates are down, i can switch into a better fixed rate

davepugh1981

One thing to bear in mind is that fixed rates are not soley dependant on the current bank base rate. Mortgage providers use risk instruments called fixed swaps which takes the risk out of offering a fixed rate mortgage.

i.e if you took out a fix rate mortgage at 4.75% but rates then rose by 2% then the bank would be losing money on its assets as it would have to increase its payments to its savers. to get round this they swap there fixed rate position for a variable rate (usually 3 month LIBOR).

Anyway my point is, swap prices are dependant on where the market expectation is. I.E what will be the average rate over the 2 years. I beleiev currently the two year swap rate is 4.69%, which means at some point th market believes ther will be a rate reduction.

Lenders then add a margin on top of this rate in order to make a profit.

One other tip i would give is leaving your decision until a little later this year, banks usually have year end targets, which they need to meet in order to impress the stock market. I imagaine most banks are struggling wth the house market in its current position, and in order to attract business will offer some tasty rates around September or October time, in order to get the compeltions in before the year end.

In case anyone doubts my insight (which anyone can if they wish), I have just finished working for the countries leading specialist lender in there mortgage planing department.

TTFN
Dave