Reports that cheaper mortgages through fixed rate deals were on the way might be an over- exaggeration. The theory was sparked by money market rates falling steadily over the last six weeks, making it cheaper for lenders to fund fixed rate deals.
In February Sir Edward George, the Bank of England governor, said markets were set too high in anticipation of bank base rate (BBR) rises. BBR did not rise, so experts believe the drop is just a correction, rather than an indication that the cost of fixed rate borrowing is set to fall.
Alex Bannister, chief economist at Nationwide Building Society said: ‘Sir Edward’s comments would have had an effect on the money markets, and there have been other comments by Monetary Policy Committee members as well. Markets still think rates will rise, but just less quickly and a bit later.’
He added: ‘Rates are the same as in February. There has been weaker data on the economy, so there is a perception that base rates will not rise any time soon. This move will help people reprice, but doesn’t mean they have changed their view of the future ‘ rates are just bobbing around with sentiment.’
Matt Russell, product development and sales support manager of The Mortgage Business, said: ‘It is not a dramatic reduction. We have a rate fixed until September 2003 at 5.49% and a three-year fixed rate at 5.99%. We have kept those consistent despite the recent drop, so we are, in my opinion, where we were six to eight weeks ago.’