Charcol says it's odds-on that Base Rate has now peaked

Amanda Jarvis

November 5, 2004

Ray Boulger of Charco comments on the decision by the MPC to freeze Base Rate at 4.75%: “The City would have been staggered if today’s decision was anything but a freeze. All the statistics and surveys released over the last month have pointed to more bearish conditions, which indicates that the previous rate rises have now seeped into the market. This appears to have had the desired effect of slowing the housing market without causing the crash landing some people were fearful of. We are inclined to believe that rates have now peaked.

“The City has already revised downwards its predictions for where Base Rate will peak, and may have to contemplate the very real prospect of rates falling earlier than previously anticipated – possibly even as early as the first half of next year.”

Boulger continues: “Trackers are still looking the best bet for homeowners at the moment due to an increasing expectation that rates have now peaked, and may soon ease back. There are a couple of excellent five-year capped trackers on the market, which offer protection against rates rising too high over that five-year period, whilst guaranteeing to pass on the savings of any rate falls. We would advise against any long-term fixes for the moment; homeowners could be locked into a deal that will prove costly over that length of time. Short-term fixes will give those looking for interest rate security peace of mind, but we wouldn’t recommend anything above three years.”

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