The lowering of fixed rates has come as swap rates have also dropped. Ray Boulger, senior technical adviser at John Charcol, said swap rates were key to fixed, as lenders try to judge how the Base Rate will move.
He commented: “Short-term swap rates are higher than the Bank rate at the moment, at about 5.2 per cent, because people are anticipating a rate rise. But long-term they are lower, as the industry expects the Bank of England to keep inflation under control. Fluctuations on swap rates will be the main reason for a change to fixed and they have come down as swap rates have also dropped slightly.”
Boulger added the intense competition between lenders over fixed rates was another factor and noted: “The most interesting trend is the number of lenders offering rates depending on fees, where the rate is low but there is a high fee. The fee is subsidising the rate. Halifax and Nationwide have the cheapest two-year fixeds in the market under the Base Rate, but both have high fees.”
Roy New, a sole broker, said: “Fixed rates are very good at the moment and there is a general trend of people liking fixeds because of the rising Base Rate. While the housing market may have picked up, the economy, in my view, has reached the top. Another quarter per cent will cap it and bring it down. I think the Base Rate will go up another quarter point before Christmas, but they’ll release the stranglehold before June or July next year. All the signs are that by then the rate rise will have stemmed inflation and slowed the economy enough.”
