Fixed mortgage rates cut, about time too

More than a month after the Bank of England cut base rates for fixed mortgages borrowers are finally seeing the benefit of some more attractive deals. Building Societies and banks blamed the slow start due to the high swap rates that banks charge to lend to each other, no doubt exacerbated by the recent Northern Rock scandal.

But now things are starting to settle in the mortgage world, and believe it or not they may be set to look even better. Much like December the Bank of England may cut base rates even further. In light of this many major lenders have started offering lower fixed rate mortgages to new borrowers.

Experts in the area have welcomed the developments by saying “The cost of borrowing has come down for lenders. Yet until last week we had seen little evidence of this being passed on in the form of new mortgage deals. The credit crunch has no doubt made lenders nervous about their funding and more acutely aware of their margins.” For over a month experts and borrowers alike have been waiting on baited breath for some leeway.

As well as praising the effort experts are urging people to act fast as these rates are not likely to be around for long. A lot of these new deals on mortgages have some requirements too, such as First Direct who have launched a two year fixed rate of 4.75% with a £1,498 arrangement fee but it is only available to people who have a minimum of 20% equity in their home.

Despite fixed rate mortgages changing a lot of people have opted to remortgage with tracker based mortgages instead as they follow the base rate, yet there is still a risk involved. The number of people changing to a tracker based mortgage has risen by anything from 22% to 52% as people are more prepared to take a rise on the base rate rising and falling. One of the main attractions of tracker based mortgages is that they have no arrangement fees but again, if the Bank of England decides to increase rates again then the borrowers may end up paying more that if they had a fixed rate mortgage.