If you're on a
variable rate mortgage, you should consider taking advantage of historically low
fixed rate deals before interest rates start rising again.
The dramatic reduction in the base rate between October and March has proved great news for borrowers, with mortgage rates tumbling in recent months.
Variable rates are actually lower than fixed ones at present, so you might think that they are the deals to go for, but do this and chances are you'll be sorry.
Base rate will rise again this year
The base rate has remained unchanged for two months now, and analysts believe it is only a matter of time before it starts rising again, and when it does, the increases will come thick and fast.
That will prove terrible news for
variable rate borrowers, but of course
fixed rate borrowers will be insulated from these rises.
This means it may well be worth accepting slightly higher rates now in order to benefit in the long run.
Time to start shopping around
So when should you look to lock into a fixed rate deal? Well, the sooner the better. While rates are currently at historic lows, London & Country mortgage broker David Hollingworth believes they could soon be on the rise.
“There has been just a little bit of movement in fixed rates, which suggests that rates could start going higher,” says Hollingworth. “There seems to be little value in going for a variable rate mortgage right now.”
The likeliness of fixed rate hikes increases when you consider that swap rates, which determine fixed-rate deals, rose to 2.17% for two-year deals and 3.36% for five-year deals in the last fortnight.
Rate depends on LTV
There are certainly a number of attractive deals on offer at the moment – provided you own a sizeable chunk of your home.
There are two year deals available at just 3.19% with
Alliance & Leicester (with a hefty 2% arrangement fee), but the LTV only goes up to 65%.
For those looking to
lock into a longer term deal, there are five year deals available with a rate of 4.24% at Britannia Building Society, but again the LTV is a fairly low at 60%.
