Fixed rate mortgage, or not fixed rate mortgage? Monday, 18th January 2010

Mortgage borrowers are looking at a difficult choice on this. This is because fixed rate mortgages continue to be comparatively expensive by comparison with tracker deals. That poses the question: when will interest rates rise?

It is generally agreed that there will be no dramatic increases in 2010, above 1.5% for example. However, these forecasts are no guarantee that mortgage rates won't rise and when they do mortgage trackers will get more expensive. Mortgage borrowers looking for advice and security would do well to consider the extra cost of a fix as worthwhile, or at least opt for a mortage tracker deal that would not lock them into rising mortgage rates.

If you are a potential mortgage borrower you might willing to take a gamble and decide that even if the base rate did rise, this would indicate that the economy and banking system was in better shape and crucially therefore more competition could mean cheaper fixed rates anyway.As an example of this,the advice from London Mortgage Advice might be that the current two-year swap rate is 1.90%, meaning that lenders asking 4% for a fixed rate mortgage are charging a healthy margin that could be trimmed. These margins are being maintained by the difficulty in raising funding, meaning that no lender is willing to break ranks, cut margins and benefit from a huge amount of business.
There is no easy answer, but if you are looking for a mortgage make sure you do your homework. These links should help.