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MORTGAGE UPDATE: the base rate guessing game

The latest report from a leading economic think tank claims the Bank Base Rate will stay at 0.5% until 2014, while the government's own Office for Budgetary Responsibility suggests that rates may rise next year.

Meanwhile, one member of the Monetary Policy Committee insisting that rates need to rise now.

Welcome to the wonderful world of economic forecasting.

With all these contradictory forecasts around, it is no wonder that borrowers are struggling to know what to think. Trying to call the future, as many do, can often work out to be more than a little painful and what is good now for one person, may not be in a year or so.

Choices

If you subscribe to the view that rates will be low for a while yet and, more importantly, can afford to meet an unexpected rise of at least 1%, then there are some eye-catching low rates. Two-year tracker rates are now starting from just 2.19%, (4.00% APR), whilst there is an excellent lifetime tracker starting at just 2.35%, (2.40% APR) with no repayment penalties.

On the other hand, for those who are a little more cautious and need the security of a fixed rate, for just a little more you can obtain a two-year fixed at 2.89%, (3.50% APR).

There are also some highly competitive longer-term fixes with three years starting at 3.64%, (5.60% APR), and five years from just 3.99%, (4.70% APR).

Rise

For us, even though the budget has sounded the starting gun on some pretty hefty cuts, which will in turn feed through to unemployment figures and a potential slowdown in the pace of recovery, we are sticking to our guns that rates will have to rise sooner rather than later.

And whilst tracker products are undoubtedly cheaper at present, whether they are better value can only be judged with the benefit of hindsight.

Click here for the latest best buy deals.


Andrew Montlake is director of communications for Coreco.

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