Fixed-rate mortgages 'still a gamble'
Tuesday, 15 March 2011 2:45 PM
Interest rates in the UK would need to rise considerably before fixing a mortgage becomes worthwhile, new figures suggest.
According to research by Capital Economics, the Bank of England would have to push up its base rate to at least 3.25 per cent before fixed-rate deals became the more cost-effective option for homeowners.
Borrowers are currently facing a dilemma over whether or not to protect themselves against future interest rate increases by locking into a fixed mortgage product, the Daily Telegraph reported this week.
But economists have warned that, despite soaring inflation putting pressure on the Bank rate to rise, mortgage customers are taking a "pretty big gamble" by fixing now.
The Capital Economics figures show that a new £150,000 fixed mortgage costs £921, £84 more than a current variable-rate deal at £834.
Paul Diggle, an economist from the group, told the newspaper: “We continue to think that the case for an immediate rate rise is weak. And even if Bank Rate were raised within the next few months, the chances of this signalling the start of a sustained round of tightening are slim.
"If we are right, then a borrower taking a fixed rate now will find themselves paying considerably more over two years than those on variable-rate deals," he added.
Want to be the first to know when we break a story? Follow @AboutProperty on Twitter.
