Discount mortgages to ‘increase in demand’, says industry expert

Ramesh Sharma

June 1, 2004

Jeff Knight, head of marketing services at GMAC-RFC, informed Mortgage Introducer of his predictions after the Monetary Policy Committee (MPC) voted to maintain the Bank Base Rate (BBR) in November at 4.5 per cent for the third consecutive month.

Knight explained: “I believe we have seen interest rates level off now. The rises have been sufficient to cool down the economy but looking at all the economic data available I’m predicting the next interest rate movement will be downwards and this will happen sooner rather than later. This should provide a welcome stimulus for the market.”

“Because of this I’m also predicting we should now begin to see an increase in demand for discounted rates whereby borrowers can benefit from any decrease in BBR,” he added.

But Simon Chalk, mortgage planner at Mortgage Portfolio Services, said: “I’m not so sure. There’s not a huge margin between fixed and discount at the moment. Fixed rates have been the flavour of the month for a while now and this will continue as long as swap rates don’t get more expensive.”

Mehrdad Yousefi, head of intermediary mortgages at Alliance & Leicester, said: “Economists are likely to look closely at consumer spending patterns after Christmas to assess the impact of a possible rate change. If retailers don’t report good sales levels over the festive period then a rate cut could be on the cards.”

But Duncan Pownall, mortgage development manager at Bradford & Bingley, argued: “There’s still debate as to whether there will be any movement in interest rates this year. We believe it’s likely that BBR will remain on hold next month unless there’s very firm evidence of further weakening in the economy as a whole.”

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