Charcol: fixes less popular

Nia Williams

December 18, 2009

This is five percentage points lower than the October figure and most clients who opted for a fixed rate took a 2 year fix, with nearly all the rest choosing a 5 year deal. This is the smallest market share for fixed rates since October 2008 and continues the dramatic decline from their recent peak market share of 83.1% only 5 months ago in June, according to the John Charcol Index.

Ray Boulger of John Charcol commented, “The cost of both fixed and variable rates fell in November as a result of some increased competition from lenders. Although fixed rates fell a little further than trackers the difference in the initial pay rates still assumes Bank Rate will increase more quickly than many economists predict and on most interest rate forecasts a good tracker will cost less more than a comparable fixed rate over at least the next 2-3 years. Indeed only last week Roger Bootle, managing director of Capital Economics, forecast that Bank Rate would not exceed 1% in the next 5 years.

“However, in this uncertain world things can change quickly and so we have advised many of our clients to take a lifetime tracker rate with low and only short term early repayment charges so that they are in a position to switch quickly to a fixed rate if the interest rate outlook changes. Although we don’t expect longer term (say 5 years or more) fixed rates to fall much below the current best rates of just under 5%, it seems probable that rates around this level will be available for some time. Thus borrowers on a variable rate will probably be able to benefit from a tracker rate more than 2% below a comparable 5 year fix for quite a while before considering switching to a fixed rate.”

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