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Two-year Swap rate fall hints at base rate cut: Moneyfacts

The interest rate futures market shows anticipation for the Bank of England cutting the base rate soon, with the average two-year Swap rate having fallen 0.17 per cent in the past month.

With BoE figures showing that 92 per cent of advances approved in the first quarter of this year being fixed, Moneyfacts believes that a “lack of appetite” for variable rate products could therefore lead to trouble for some borrowers.

The total number of tracker mortgages available, however, makes up only 5 per cent of all residential mortgages on the market, equating to 242 products, Moneyfacts says.

Furthermore, one in 10 tracker products have a collared rate, meaning that regardless of what happens to the base rate, the tracker has a specific floor that it cannot move below, meaning that some borrowers would enjoy the benefits of a base rate cut.

Moneyfacts finance expert Darren Cook says: “It is unclear in which direction the next BoE base rate change will be going, but current future markets indicate that it may be on the way down, so it is surprising that we see so few tracker rate mortgages currently available in the market.

“The tracker rate sector seems to be competing against near rock bottom rates on fixed mortgage deals, and a large majority of borrowers are taking advantage of these low rates.

“The choice between opting for a tracker rate mortgage or a fixed rate mortgage is down to the risk appetite of the potential borrower, but with nearly 92 per cent of advances currently being fixed, it seems that nearly all borrowers are choosing to be risk-averse during this period of economic uncertainty and favourable fixed rates.”

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