The Return Of The Fixed Rate Mortgage

Copyright (c) 2011 Steve Wentworth

It is without doubt that the Bank of England will raise the interest rate at some point in the future. The Bank Base Rate BBR can not remain at the historic devalue of ½%. Last month Paul Fisher, the executive director of markets and member of the Monetary Policy Committee (MPC, responsible for setting the bank base rate) addressed with the Daily Telegraph how associates desire to see rates rise to their regular point, and that he hopes people are mindful that rates will hike to this regular position. The typical position would be that of Gross Domestic Product as well as inflation. So with GDP about two and a quarter percent and target inflation of 2% then an ideal average BBR would be 4½ - 5%, ten times more than the current figure.

Some articles have distorted Mr Fishers statements even the Daily Telegraph who lead the consultation declared 'central bank policy-makers would like rates to increase as much as tenfold from their current historic low of 0.5pc as soon as possible'. Yet, reading the literal transcript, Mr Fisher only agreed to the Daily Telegraphs economics editor Philip Aldricks ideas of a average rate of 5%. Mr Fisher did say that the Monetary Policy Committee would need to follow closely people's response to those modifications in rate. 'It's not something where we would put rates up and ignore the reaction to it'. Increase of the rates would only be made speedily if the capability in the economy demanded it. The MPC would not be increasing rates so speedily as to cause a damaging response.

With bank base rate halted at ½% for the preceding almost 2 years, this has instilled a rate-spoilt ethos into current debtors. With mortgage lenders standard variable rates below best buy frozen rate mortgage deals it appears home-owners are refraining from remortgaging to a new fixed rate product until the BBR starts to rise. Currently over a 3rd of home-owners are at present on their mortgage providers basic variable rate mortgage with no thoughts to re-finance. Taking a look at the following best buy fixed rate mortgages based on the average United kingdom house price of £160,000 and 25 year term: -

Re-mortgage at 60% LTV (mortgage of £96,000)

2.59% fixed for 2 years, monthly payments of £435, £525 fees.

3.28% fixed for 2 years, monthly payments of £469, £35 fees.

2.89% fixed for 3 years, monthly payments of £450, £525 fees.

4.09% fixed for 3 years, monthly payments of £512, £234 fees.

3.89% fixed for 5 years, monthly payments of £501, £524 fees


Re-mortgage at 80% LTV (mortgage of £128,000)

3.49% fixed for 2 years, monthly payments of £640, £301 fees.

3.99% fixed for 3 years, monthly payments of £675, £25 fees.

4.6% fixed for 5 years, monthly payments of £719, £720 fees.


In 2007 the fixed rates reached approximately 7.8% therefore todays leading fixed rates prove a profound saving considering that BBR is probable to hike at some point in the near future. The first time the Monetary Policy Committee agree to increase the bank base rate will be the important signal to people that rates are on the rise and its worth noting that fixed rates as advantageous as those listed in this text will be unavailable, for a real long time if ever.

It is the view of the author that the MPC will unlikely step-up interest rates in the January 2011 meeting on Thursday 13th. This view is founded on the fact that the oucome of the VAT rise to 20% at the beginning of the month is unknown. All the same, from reading various documents and remarks from individuals in involved with the economy the author does have an impression that a test rate increase could be made in the February or March meetings, after the result of VAT can be judged and ahead of the National Insurance increase in April.

Should I remortgage to a fix rate mortgage? If only we could impart an accurate forecast, but we can't. We can all the same, arm you with the correct info and opinions from those in the know so you can make your personal judgement


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Steve Wentworth formed his firm Wentworth Financial Services in November 2007 having been in the industry since Nov 2002. See how much your mortgage could go up by using our mortgage calc. Or for mortgage broker then complete your details on our site.