The John Charcol Index revealed that the proportion of fixed rates has fallen below 20% for the first time since August 2008.
Ray Boulger of John Charcol commented: “Whilst the split between variable and fixed, at face value, seems dramatic, it is really no surprise as it is absolutely our belief that the best value lies in tracker rates at present. With the average difference between the best fixed rates and the initial rate on the best trackers around 1.5% in favour of trackers, it will currently take a substantial rise in bank rate for a borrower who takes a tracker to be worse off than one who opts for a fixed rate.
“Of course, some people always prefer the security and comfort that a fixed rate naturally brings, but in the current market you really do need to question whether you are paying over the odds for that security. Generic advice on whether to take a fixed often simplistically states that if you cannot afford a rise in rates then you should take a fixed rate. If rates for both fixed and variable are at the same level then clearly that is a no-brainer, but when there is a gap as wide as in today’s market being generic can easily be misleading.”
So when to fix…
“When the appropriate time will be is the million dollar question but with Bank Rate likely to stay very low, say not above 2.5%, for quite some time, and the cost of fixed rate mortgages still falling, it is not yet,” said Boulger. “Despite December’s unexpectedly large rise in the inflation numbers most economists expect the Consumer Price Index to fall back below 2% by next year, even without a significant increase in interest rates, and the Bank of England takes a 2 year view on inflation. In the short term the main risk on interest rates is political and so following the opinion polls in the run up to the election will be very relevant to forming a view on interest rates.”
