Fixed-rate mortgage: Still too early

UK mortgage pricing is showing sings of beginning to turn a year long increase in prices, but it is still too early to lock into a fixed-rate mortgage deal.

Earlier this week Nationwide announced it was cutting the cost of fixed-rate borrowing by as much as 0.46 per cent, the second such cut in as many weeks.

Abbey, Woolwich and even the nationalised Northern Rock have also cut the cost of the fixed-rate borrowing in recent days.

"For far too long, the status quo of the mortgage market has been increasing rates and misery for most borrowers," said Drew Wotherspoon of Charcol.

"The crunch has seen liquidity in the market all but dry up, but news from Nationwide that they are cutting both tracker and fixed-rates will come as a huge relief for all borrowers.

"With one of the country's leading lenders taking this welcome step, this should be a sign of things to come."

The change in market sentiment has followed a fall in the London Interbank Offered Rate (LIBOR) which has fallen by 0.7 per cent over the last few weeks from its June high.

"Even the bad news on inflation has failed to dent their progress downwards, and now lenders are, theoretically at least, able to offer better priced products," continued Mr Wotherspoon.

"I would hope to see other lenders follow suit soon bringing some much needed competition to a market that has been depressingly bereft of vying lenders."

However, with the Bank of England base rate likely to fall before the end of the year, depending on the direction of inflation – which presently stands at 3.8 per cent – it could be too early to look for a fixed-rate deal, warns Charcol.

Chris O'Toole