Charcol predicts rate rise

Drew Wotherspoon, of John Charcol, commented: “It’s no surprise to see Base Rate held as the true impact of last months increase, the first move in a year, is still to be fully felt. If the strong growth in the housing market reported by leading industry bodies continues for the next month, then this, coupled with the next quarterly inflation report, makes November the most likely time for another quarter point rise.

“There has, however, been some discrepancy in the monthly figures from Halifax and Nationwide, with each reporting different levels of growth. While it is usual for there to be some difference due to their respective methodologies, with the decision on whether to increase the Base Rate resting partly on the strength of the housing market, it is crucial that these figures are duly scrutinised to ensure that the real rate of growth is ascertained as accurately as possible.

“While the housing market is still in good shape, consumers continue to be hit by increases to domestic fuel bills, many of which won’t be implemented until later this year. Retail statistics also show that the Bank’s interest rate rise in August has hit retail shopping. The latest retail figures show a fall of 1.3 per cent on July 2006 which is down 3 per cent year on year. Inflation is also still way above target at 2.4 per cent and a 0.1 per cent fall on last months figures shouldn’t be seen as a solid correction in the market.”

What should borrowers do now?

Wotherspoon continued: “For those able to afford a tracker they are still the best option and offer better value than most fixed rate mortgages in the current market. Trackers will continue to be a good option unless Base Rate rises above 5.25 per cent which won’t happen in the near future. Depending on the size of your mortgage, there are a number of superb trackers currently available.

“However, it’s important to highlight that there will still be a big market for fixed rate deals due to many people wanting the security of knowing exactly what they are paying out each month. There are a couple of extremely good fixed rate options on the market, most notably from Halifax and Woolwich. The market leading Halifax two-year fix at 4.49 per cent (6.8 per cent APR) with a fee of £1,499, again, works for larger loans and is available to 75 per cent loan-to-value (LTV). The Woolwich fixed rate mortgage at 4.98 per cent (6.7 per cent APR), with a lower fee of £595 is a ten-year fixed rate and offers great value for those who are looking to fix for the long term.”