City analysts not convinced of Bank base rate change

Gary Hockey-Morley, director of mortgages at Abbey, says that city analysts are now less convinced about a change in the Bank base rate before Christmas and that this is good news for savers, but not so good for borrowers who might be opting for a cut.

Hockey-Morley says: Next week the Monetary Policy Committee will meet to decide whether or not to keep the Base Rate on hold for another month. Economic news in the UK, and globally, has led to an upward movement in swap rates, which are the money market rates upon which fixed rates are based.

This has prompted many lenders to increase their fixed rates in recent weeks. Whilst it may be too late for borrowers to take advantage of the cheapest fixed rates this year, it is still a good option for those borrowers that like the certainty of knowing what their mortgage payments will be each month.

Put in context, interest rates are still low compared with the 1990s. However, the overall trend since autumn 2003 was upward until the Bank of England cut the Bank base rate in August.

“Mortgages that track the Bank base rate are currently offering very competitive deals and financial markets have been signalling a possibility of a rate cut in the new year, although this is far from certain.

All borrowers coming to the end of a deal should look around for their next mortgage deal as soon as they can. Shopping around is crucial because rates and fees vary greatly between lenders and can change quickly. It is really important that borrowers find a deal that suits their individual needs. Remortgaging is easy to do and could result in a significant monthly saving.

Many people leave it to the last minute, or even later, before they actually remortgage. Abbey calculates that each month a borrower stays on an industry average standard variable rate rather than remortgaging to a better rate can cost up to 148.