Borrowers face a tough decision

I\'m sure it did not come as a surprise to many industry experts that the Bank of England held the base rate at 0.50% this month.

With interest rates at a historic low, it was widely predicted that a hold decision would be announced. It now seems inevitable that in the medium term rates can only go one direction, and that’s north.

This means home owners considering a new mortgage are faced with a complex decision. With tracker rates looking attractive as are some lenders’ SVRs, their product choice is not going to be straightforward.

But variable rates are likely to rise. This presents brokers with a great opportunity to discuss the option of a three, four or longer term fixed rate.

Figures from the Council of Mortgage Lenders show that there has been a shift towards borrowers taking out fixed rate deals – 56% of mortgages completed in February were fixed rates compared with 49% in January. This shows that consumers are thinking about longer term payment security.

Also, many borrowers coming off discounted rate products over the coming months will be looking for their next deal.

While fixed rates are not looking spectacular compared with trackers, they will start to look attractive when variable rates rise. The decision to move to a fixed rate depends on borrowers’ long-term plans for their property.

But now is the time for clients to make a decision on what product to choose as swap rates are beginning to edge up, so many lenders will be forced to revise their fixed rates.