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Borrowers set for boost as lenders get ready to react to base rate reductions

The Bank of England base rate is likely to fall in the coming months, sparking intense competition between mortgage lenders that will leave borrowers spoilt for choice, says Charcol.

Subdued retail sales at Christmas were not poor enough to warrant an immediate rate reduction but, combined with “an increasing softening of the housing market”, a fall looks more likely, says Charcol senior technical manager Ray Boulger. Consumers are likely to benefit, with most lenders planning increased or unchanged lending volumes despite expectations that gross lending will fall by around 8 per cent over the year.

Fixed rates are currently available below 5 per cent for up to 15 years.

The impact of the internet on consumer choice is also credited with keeping a lid on inflationary pressures.

Lenders are suffering from the effects of statutory regulation, which led to a fall in lending, and are likely to target the remortgage market as the purchase market remains weak.

Boulger says: “A base rate reduction looks increasingly like the next move but getting the timing right will be a difficult judgement.”

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