BoE August Meeting - Effects on Rates / Timescales

Keanu

I am in the process of tying up a new fixed rate deal to kick in from September 1st. I have been monitoring the rates on offer and note that many lenders have reduced rates further in the last few weeks, to the point where I am tempted with 4.79 fix for 5 yrs (Intelligent Finance).

My question is, to those of you with a more informed opinion out there, if the BoE meeting next week results in the base rate being reduced, say to 4.5%, will this result in an avalanche of further reduced fixed rates, or have many lenders already factored this in?

The broker I am dealing with is pushing me to move on the deal, explaining that if I want a 1st Sep deal I am running out of time - is this them touting for business or are they right? I would hate to sign up for five years and miss on out better fixed rates by a few days.

To summise, two questions
- will a reduced base rate result in even better fixed rates.
- will it take long to tie up a deal, I only have a month to play with.

Cheers

MortgageGenie

Hi,

Personally, I don't believe a reduction of 0.25% in August is in itself going to have a big impact on fixed rates as the market has already taken this as a Fait accompli. The minutes could be more telling, as they will tell us how many voted for the reduction and could offer an insight to further changes.

Now for the difficult part... I'm not aware of your personal circumstances, therefore there may be a perfectly reasonable explanation for your brokers recommendation, however 4.79% fixed for 5 yrs isn't particularly competitive as there are much lower 5 year fixed rates available. Are you an existing IF customer?

In answer to your questions:
1. It depends on where the markets believe we're going after this reduction
2. For the most competitive deals you should plan on 6/8 weeks

river_kwai

I think the market has already factored in one drop in August and another one before the end of the year, 25 basis point drops each time. This explains the likes of deals at around 4.25% or even lower for the fixed 2 year deals.

herbiesjp

I believe a lot of lenders have indeed factored in rate cuts into their current batch of fixed rate products - but it will depend on how hangry they are for the business as to how low they will go.

As to whether there are better 5 year fixed rates (if you decided that a 5 yr fix is right for you) the answer is yes.

However, your personal circumstances will dictate which schemes you will and will not be eligible for.

Keanu

Thanks MortgageGenie/River Kwai/Herbiejsp,

Point 1:

I believe I am in a pretty good position regarding the offer I take up.

I'm remortgaging from another lender and wish to tie up a fixed rate for 5 years.

I'm in a position where I'll looking for £48k over 14 years. This works out to less than a 50% mortgage, I'm not looking for any extra cash.

Due to the relative low amount I am loooking for one with the lowest set up cost, against obviously the rate. The IF mortgage recommended worked out to a total of £300 fees (valuation/legal fees repaid on completion/paid). That, with the 4.79 rate, apparently equates to the best mortgage for me. However, I am more than willing to be advised otherwise if that is the case!!

Point 2:

I wish to tie up a deal relatively quickly as to move to the SVR with the current lender will jump to payments of £350 a month (over 22 years). the IF mortgage under consideration equates to £400 for 14 years. From that you can see why I am keen to tie up a mortgage at the end of my current deal (September).

Any further advice gratefully received.

MortgageGenie

Hi,

This isn't a recommendation however based on your last post IF looks like a good option to me.

Just noticed your other post re conveyancing. Go back to your broker and let him know the situation. I haven't used IF for a little while but I think you'll find they'll appoint a conveyancer for you and charge around £200 + VAT for the additional work which is known as "transfer of equity".