Ray Boulger, John Charcol's senior technical manager, said the fact that the Monetary Policy Committee were seriously considering a half point cut last month was a strong indicator that they would cut rates again in January.
However this was not the case and Charcol estimates that UK homeowners with a variable rate mortgage are going to be coughing up about £105m per month in mortgage interest payments as a result.
Boulger said: “If the MPC delays the next cut too long, Bank Rate may have to fall further than would have been the case with an earlier cut.
“There is nevertheless some good news for borrowers looking for a fixed rate; the Bank Rate/LIBOR spread has narrowed sharply over the last couple of weeks, as has the gilt-yield/swap rate spread, albeit to a lesser extent, and this is an encouraging sign for an easing of the liquidity squeeze.
"Because swap rates have fallen sharply over the holiday period, to around 5 per cent, borrowers who prefer a fixed rate mortgage should see lower rates soon, although so far few lenders have reduced their fixed rates to reflect these lower money market rates.”
Boulger singled out Nationwide’s flexible two-year tracker for purchases only, at Bank Rate + 0.08 per cent with a £599 arrangement fee. He said the additional benefit of a ‘droplock’ facility was ideal in the current climate for borrowers who would like the option to switch to a fixed rate when the timing seems appropriate.
