Tracker deals gain ground as MPC holds base rate for another month
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The Monetary Policy Committee voted to hold rates at 0.5% for the seventh month in a row last week and to continue with its quantitative easing programme.
The MPC voted in March to reduce the Bank of England base rate from 1% to 0.5% and a number of experts are now predicting that it could be some time before it starts to climb again.
In an exclusive report in Mort-gage Strategy’s sister publication Fund Strategy from its investment summit in Dublin, Roger Bootle, managing director of Capital Economics, predicts interest rates will stay at their present level for the next five years.
Meanwhile, Legal & General Mortgage Club says that almost one in five of the mortgage applications it saw in Q3 2009 were for tracker rates - up from 12% in Q2.
Ben Thompson, director of mort-gages at Legal & General, says: “There has been a notable shift in popularity towards tracker rates as expectations of a long period of low interest rates become entrenched among borrowers.”
Thompson says he expects the proportion of those seeking tracker deals to rise by the end of the year.
He adds: “We expect the MPC to hold interest rates steady for some time but rises are inevitable so borrowers must be prepared.”
And Ray Boulger, senior technical manager at John Charcol, says that while last week’s decision was a non-event there was at least some action in the mortgage market.
He says: “September saw the usual seasonal upturn and in the past few days we have started to see some competition among lenders, albeit mainly at lower LTVs.
“Although the cost of fixed rate mortgages has fallen a little in the past month most still look expensive compared with trackers or discount rates, some of which also fell during the month.”
He adds: “Variable rates continue to look more attractive to borrowers who don’t need or want the security of fixed deals.”
The MPC says the quantitative easing programme will take another month to complete and that its scale will be kept under review.
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