Have You Already Missed the Fixed Rate Mortgage Boat

The Bank of England's base rate of interest has been consistently breaking records for the last couple of years. The panic in the financial world as banks, corporations and whole countries went bankrupt, led to record low levels in interest rates. The Bank was established in 1694, with interest rates of 6%. In 2009, the interest rate dropped to 1.5% - the lowest in its 315 year history. Today the current base rate is 0.5%; bad news for savers, good news for borrowers. The question on everyone's mind is just how long can this go on? For anyone with a mortgage, or in the increasingly unusual position of planning to take one, interest rates spark a lot of interest.

Fewer fixed rate deals?

We all know that 'interest rates can go up as well as down'. There hasn't been much evidence of the up recently, and the danger inherent in this situation is complacency. Recently many banks have begun to withdraw their fixed rate mortgage deals, or to make them more expensive to acquire. This should ring some alarm bells for anybody who has been thinking about switching to fixed rate. The banks, believe it or not, know what they are doing. It makes very unsound economic sense to allow their customers to tie into fixed rate mortgages now, if they think that rates are set to recover. The recent trend to withdraw the product, or make the short term costs prohibitive, suggests the banks are expecting some healthy rises in interest.

Balancing the costs

So is it too late to opt for a fixed rate mortgage? No, deals are still available, and will continue to be so. Fixed rate mortgages are an attractive option and banks know that many homeowners are still looking to tie in. While interest rates can go down, there isn't very far for them to go in that direction and it's likely that over the next five to ten years, the only way is up. With this in mind it is still worth considering shopping around for a fixed rate deal. The days of cheap fixed rate deals are possibly in decline, but that doesn't mean that by fixing now, you can't save later. The arrangement fees may seem to be rising excessively, but balance the up-front cost against savings you could well accrue by fixing now.

Fortune telling

Forecasting the financial markets future may seem to be a job best completed by a fortune teller on Blackpool's Prom, but signs are that interest rates will rise. Pressure is building on the Bank of England to raise the rates from their all-time low. Inflation is concerning the government, who are keen to see a drop in inflation figures. In 1979 the base rate reached an all-time high of 17% when Geoffrey Howe was trying to manage the upwards spiral of inflation. Many homeowners have 'panicked' in the early part of this year, rushing to tie in their rates. This is partly to blame for the bank's withdrawal of the products or the rise in arrangement fees. There is a strong chance that interest rates will rise this year, but they will probably do so slowly. There will still be time to secure a deal which will allow you to keep your rates low over the coming months and years.