The lack of competitive fixed rates has pushed borrowers to plump for more risky tracker rates, opting for those without Early Repayment Charges (ERCs) in case they need to get out fast.
Katie Tucker, Charcol's technical manager said that those borrowers hoping for a further rate cut were choosing to hang on for the re-emergence of sub-5 per cent fixed rate deals.
“Two-year swap rates dropped considerably following the last Bank Rate reduction, but lenders have not yet brought down their fixed rates accordingly; most are making up for the high cost of their lending in last quarter of last year due to the credit crunch.
"However, another Bank Rate drop should give lenders sufficient confidence that cost of their funds will remain low, allowing more of them to offer fixed rates under 5 per cent."
So far only Bristol and West and Leed Building Society have released fixed rates below 5 per cent, but were faced with such huge demand that they ran out of money on them almost immediately.
Tucker said that First Direct currently has the lowest two-year fixed rate at 4.75 per cent, although only to a maximum loan of £300,000.
She added: "Yorkshire also has a good two year fix at 4.95 per cent with a fee of £1,995 that has the added flexibility of overpayments, underpayments, payment holidays and borrow-back. National counties has opened a very low 5.19% five year fixed rate with a fee of £595, however with talk of rates falling further, it’s too early to chose a rate for a five-year commitment for most borrowers."
Tracker-wise, Tucker also highlighted Lloyds TSB's 0.18 per cent above Bank Rate deal for two years.
