Rate rise uncertainty sees fixed-rate popularity subside

The fall of inflation in the UK to 0.5% in December now means that the general consensus is that the Bank Rate may not rise until late 2015/early 2016. And with the Monetary Policy Committee unanimous in keeping the 0.5% rate this month, we could easily see it in place for the rest of the year.

Brian Murphy, Head of Lending at Mortgage Advice Bureau, commented:

“Two year tracker and two and three year fixed rates continued to fall to record lows in December, and the competitive lending market makes it likely that rates still have room to decrease further.

"With a Bank Rate rise no longer on the immediate horizon, we have seen the popularity of fixed rate products begin to subside, as borrowers feel more confident in purchasing variable rate products.

“Rates speculation mean the eventual rise should not come as a surprise, particularly to new homeowners whose incomes are being thoroughly stress tested for higher repayments.

"The Bank of England’s guidance that any increase will be gradual and at a slower pace than in previous cycles still stands true. This means there is unlikely to be much immediate impact on homeowners’ finances, and borrowers are being given plenty of time to prepare.”