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24 Jan, 2008

Leah Milner
Date: 24-Jan-2008

John Charcol has revealed that the three most popular mortgage products so far in January have all been trackers with no early repayment charges.
The brokerage says this is probably the result of expectations that the Bank of England base rate will drop in February and the current lack of competitive fixed rate deals.

Katie Tucker, technical manager at John Charcol, says: "The base rate is widely expected to fall so trackers or discounts make sense for most borrowers, and one with no tie-in at all means you can remortgage away when you like.

"It seems that borrowers seem to be awaiting a new wave of sub-5 % fixed rates."

She says that two-year swap rates, which indicate banks' predictions of the base rate in two years, and in turn set the price for fixed rates, dropped considerably following the last Monetary Policy Committee rate cut, but many lenders have not yet brought down their fixed rates accordingly.

She adds that most are still making up for the high cost of lending in the last quarter of 2007 due to the liquidity crisis.

But she says if the bas rate drops again this should encourage lenders to drop their fixed rates.

John Charcol reveals that the few lenders that released two-year fixed rates under 5%, such as Bristol & West and Leeds, quickly ran out of funding and took them off the market in less than a week.

Tucker adds: "This merely emphasizes how vital it is for borrowers to move fast when a good deal does come up."

John Charcol reveals that Abbey, Cheltenham and Gloucester, First Active, Halifax and Nationwide have put their tracker rates up or their fixed rates down, in expectation of another drop in the base rate.

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