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Five minute finance: Should you fix your mortgage?

Five minute finance: Should you fix your mortgage?

Category: Mortgages

Updated: 23/08/2010
First Published: 23/08/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The biggest threat to the Bank of England keeping base rate at its record low of 0.50% is a rate of inflation in excess of the Government's target of 2%. Even though the latest Consumer Prices Index stands at 3.10%, the Governor of the Bank of England, Mervyn King, has indicated that he would like to see the base rate remain at its low for a while yet.

However, there are no guarantees that the rate will remain low, and such uncertainty leaves those people looking to negotiate a new mortgage deal with a big decision.

Should they go down the variable mortgage rate route, where a borrower takes advantage of low rates linked to base rate and has the option to redeem to a fixed rate mortgage deal, if the base rate starts to rise. However, there is a danger that the rates on fixed rate mortgage deals will get a lot more expensive, the closer we get to a possible rate increase, as a result of funding costs rising.

Or should they take on a fixed rate mortgage deal from the start and set their monthly repayments in stone for the length of the initial rate period. Current interest rates on fixed rate mortgage deals may be a little higher than their variable counterparts, but borrowers will have the piece of mind that, irrespective of what is decided by the Bank of England each month, it will not affect the size of their mortgage repayments.

Hanley comes out on top

Hanley Economics Building Society has this week launched an eye-catching new discounted mortgage. Borrowers with a 20% deposit are being offered a rate of 3.85% until 30 November 2012, a rate that is 0.49% lower than the previous market leader. A arrangement fee of £899 is payable on the deal. The mortgage offers house purchasers a £250 rebate, while remortgagers will benefit from free legal fees.

Fix with ING

This week sees ING Direct reducing the rates on its two year fixed rate mortgage to 2.79% until 30 November 2012. The deal is available to borrowers with a 40% deposit and is subject to £945 arrangement fee. The rate is one of the lowest in the market, with those below it charging high percentage fees. Although no incentives are offered with the deal, the mortgage will appeal to borrowers looking for a low rate/fee combination.

Yorkshire cuts rates

Yorkshire Building Society continues to offer a range of competitive mortgage deals and its latest deals are no exception. Borrowers with a 15% deposit are being offered range of options including a market leading three year fixed rate deal at 4.59%, subject to a £495 fee or a two year fixed at 3.99%, which is subject to a £995 fee. Alternatively, the society is offering a competitive tracker charging 2.99% above base rate, currently 3.49%.

Act fast to secure top deal

Following exceptional levels of demand, HSBC has moved to extend the period its market leading tracker is available. Borrowers have until 5 September to take advantage of the lifetime tracker deal, which currently charges 2.19% (1.69% above bank base rate). The deal is available to borrowers with a 40% deposit and is subject to just a £99 booking fee.

Best buy mortgages

The Post Office has moved to cut rates by as much as 0.80% across the board. The lender now offers a range of competitive deals including it new best buy two year fixed mortgage which charges just 2.85%. The deals is available to borrowers with a 35% deposit and is subject to a £1,495 fee.

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.