Difficult decision for those wishing to remortgage

July 18, 2008

A recent report has shown how many people that are planning to remortgage either to get a better deal or because they are coming off cheap fixed rate mortgages may now find it difficult to determine which mortgage to go for as a result of confusion and differing predictions over what will happen with interest rates over the remainder of this year. Just a couple of months ago it was widely predicted that interest rates would continue falling over the course of this year, and that by the end of the year the base rate could be as low as 4%.

Whilst the Bank of England has already cut the base rate three times since December of last year, for the past couple of months it has remained on hold at 5%. However, there is now confusion over what will happen with the base rate. Inflation levels have soared out of control at 3.3% and the governor of the central bank, Mervyn King, recently said that the bank would have to do whatever was necessary to bring rates under control, which to some people meant that rate cuts would be put on hold and to others indicated that the base rate could rise.

Whilst some industry professionals are recommending that those looking to remortgage opt for a fixed rate mortgage just in case, other officials disagree. One stated: ‘I’m not convinced base rate will rise. Even if it does, it may go up only by a quarter of a point, and the Bank of England will have to cut it again next year. Two-year fixes are taking account of bigger rises, while the price of trackers hasn’t changed. Unless you absolutely need the security of a fix then trackers look better value.’

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