Move fast for a cheap fixed-rate mortgage

People looking to take out a cheap fixed-rate mortgage need to move fast - or be prepared to wait for months, new figures suggest.

Since the summer a mortgage price war has raged on the high street as lenders compete to win business and expectations have been high that the Bank of England is set to lower interest rates again.

But while many analysts are still predicting that the next movement in base rate will be down, some lenders are starting to withdraw from their previous confidence and increase the cost of fixed-rate deals.

This means that those seeking a cheap deal will either have to move fast, before other lenders respond by increasing the cost of their mortgages, or wait until the future of interest rates is rosier and fixes start to come down in price again.

"We have seen a number of lenders pull their fixed rates over the last week and this looks likely to continue," said Ray Boulger, senior technical manager at mortgage broker John Charcol.

"Swap rates, the basis for fixed rate pricing, are about 0.3 per cent higher than they were a month ago as a result of the city becoming less confident of a base rate cut in the short-term. However, any trend in interest rates is always interrupted by the odd hiccup and I believe that this upward movement is just that."

Recent economic releases, along with the minutes of the last two meetings of the Bank of England's interest-rate setting Monetary Policy Committee, have poured cold water on the prospect of an impending cut in interest rates - with some going as far to predict that rates could be set to rise again.

This has led analysts to conclude that it is now or never for those seeking cheap fixed-rate mortgages.

"The message for borrowers currently looking to arrange a fixed rate mortgage is clear. Either move quickly to secure some of the remaining market-leading deals, or be prepared to wait until the new year when rates may fall back. Put simply, don’t chase rates upwards at this stage of the market," Mr Boulger explained.

Having said that, going forward he was confident that base rate, and so the amount of interest charged on fixed-rate mortgages, would fall again - for those willing to wait.

"It is also worth noting that the major recent worry for inflation [which the Bank of England attempts to control through interest rates] has been the strength of the oil price and, although prices of petrol at the pump are yet to see a marked reduction because of a shortage of refining capacity after the hurricanes, crude oil has fallen 15 per cent from its high two months ago," he said.

"This suggests that some of the Bank of England’s inflationary fears should be receding."