Katie Tucker of Charcol has supported the industry's switch over to discount rates and trackers saying that they are currently the 'sensible choice', especially as she has highlighted the low price of two year swap rates at 5.56 per cent reflecting belief in an imminent rate cut.
Tucker said that lenders are not responding quickly enough though due to borrowing constraints: “The short term cost of borrowing continues to increase: three month LIBOR stands now at 6.59 per cent, more than ¾ of a percent above the official Bank rate, so lenders are recouping that cost via their fixed rate pricing.
"The time of year, plus liquidity being scarce in the market place, means there is little need for lenders to compete on rate. The US’s credit problems are strangling sub-prime lending here, making it more important than ever for the MPC take the opportunity to bring down Bank Rate, and avoid the cash dry-up spreading across the economy.”
“It is vital that borrowers allow extra time for applications, the temptation to delay applying until after Christmas may cost remortgage customers an unexpected month on a nasty high rate if they revert to their lender’s SVR while they are waiting.”
Product wise, Tucker notes that Cheshire’s two-year discount gives a pay rate of 5.64 per cent with a fee of £899, and a free valuation, as well as over and underpayment flexibility.
She added: “Fixed rates should improve as a rate cut approaches, especially if a second is expected. However, for buyers looking for a two-year fixed rate now, Abbey’s 5.59 per cent is available for a £1,499 fee, with 10 per cent overpayment facility.
“As property value increases are expected to be minimal next year, borrowers would do well to structure their budgets to allow for a year of debt repayment, whether secured and unsecured, where possible.
"Affordability is key for remortgagers at the moment, so borrowers should consider total cost over the few years they intend to stay on the deal, and monthly payments. For smaller loans, a percentage fee may work out best value if it buys a low rate.
"Lloyds TSB has a 4.98 per cent fixed for two years, again with remortgage freebies, with a 2.5 per cent fee. For a ten year fix Norwich and Peterborough has a rate of 5.68 per cent for a £595 fee, with remortgage freebies and flexibility to overpay and underpay."
