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Variable rate mortgages gain ground as confidence returns

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by Gill Montia

Last week’s decision by the Bank of England to leave the base rate untouched at 5.75% for October will increase the popularity of variable rate mortgages, which are already gaining ground against fixed-rate products.

Confidence that interest rates have now peaked is growing amongst consumers and according to a monthly survey published by Spicerhaart Financial Services, the percentage of borrowers choosing variable mortgages has risen for a third consecutive month.

Steve Cox, operations director at Spicerhaart, believes that a decline in the number of borrowers choosing two-year fixed-rate mortgages suggests that an imminent drop in interest rates is anticipated.

The Council of Mortgage Lenders, among others, has expressed hopes that the base rate will fall in November.

However, the Council is warning borrowers to continue to plan for rates similar to today’s levels.

In the City, expectations of a cut before the end of the year have been growing and this view will be reinforced by new housing market data from Halifax, showing a fall in house prices in September.

Meanwhile, Goldman Sachs and Capital Economics are both forecasting that interest rates will fall to 5% by the end of next year.

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News posted: October 8, 2007

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