The gap between fixed and discount rate products is set to fall further, despite the bank base rate (BBR) remaining static. The best of two and five-year fixed rate deals have dropped by 0.85% and 0.7% respectively in the last three months, according to Charcol. The broker predicts more lenders will follow suit in coming weeks.
Ray Boulger, senior technical manager at Charcol, said: ‘The premium borrowers pay for the security of a fixed rate has decreased rapidly over recent weeks. For most of 2002 the differential between the best discounts and the best two-year fixed rate has been 1%. This has reduced to less than 0.4% and five-year fixes, which start at 4.69%, are the lowest today’s borrowers will have ever seen.’
He added: ‘Fixed rate prices always start to move up before BBR. Sometimes it is better to bite the bullet and take a good deal close to the bottom, rather than miss out by waiting too long.’