Interest rate swaps, which determine the rate at which fixed rate money is priced between financial institutions, have fallen sharply for the second time in the space of a week, which is likely to spark a reduction in the cost of fixed rate mortgages.
Financial markets are currently trading interest rate swaps at the lowest levels in over a year and the Portman Building Society, which anticipated the move, cut its fixed mortgage rates last week.
Matthew Wyles, group development director at the Portman, said: “The markets have suddenly and decisively concluded that rates have peaked — it looks like the turn of the tide.
“Fixed rate mortgages are going to start looking very attractive, particularly for those borrowers who like a bit of certainty in their domestic budgets.”
But Wyles warned against a waiting game. He said: “During the last week, two to five-year fixed rates in the wholesale markets have fallen by 0.15 per cent or more.
“It could be quite a while before the Bank of England moves the Base Rate and borrowers who hang on could miss a real opportunity.”
Meanwhile, the latest data from Mortgages Direct showed 84 per cent of mortgages taken out over April were fixed rate deals, an increase from 30 per cent for the same period last year.
Peter Gladdy, director of Mortgages Direct, commented: “Despite the Bank of England’s decision to freeze interest rates, with a substantial increase from last year in the percentage of borrowers opting for a fixed rate loan it is clear there is an overwhelming fear that interest rates will increase.”
