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Fixed expressions

Almost three year’s ago, Britannia Building Society launched the best fixed-rate mortgage … ever.

Yes, we hear those claims quite often in press releases and marketing material but it was quite difficult to beat a rate of 3.24 per cent for two years. But all those happy punters on Britannia’s fixed rate are now having to find something to plug the hole as the product’s fixed period comes to an end.

The market seems just to have a renewed appetite for fixed rates. The Council of Mortgage Lenders says June has seen the highest take-up of fixed rates since July 2003, accounting for 47 per cent of all loans in the market.

The average price of fixed-rate products remains stagnant in June at 5.37 per cent but it looks as if this figure will be lower as competition hots up between lenders and, of course, the prospect of a cut in the base rate looks more likely.

CML director general Michael Coogan says: “Most commentators agree that interest rates have reached their peak and many expect rates to fall in the coming months. We agree. This will provide a modest boost for affordability and help to underpin market prospects.”

The CML and other bodies will all be keeping a close eye on the economy after the number of people claiming unemployment benefits increased by 8,800 last month to 864,900, according to the Office of National Statistics.

It was the fifth month running when the number of claimants rose, the longest consecutive run of rises since 1992, bringing the number of unemployed to 1.42 million. The CML has also released its new figures on mortgage arrears on possessions. The numbers are up but there is no need for panic yet, it says.

The number of properties taken into possession rose from 3,070 in the second half of last year to 4,640 in the first half of 2005 – similar levels to 2002 and 2003. The number of mortgages in arrears of three to six months was 57,220 up from 53,960 in the last half of 2005. The CML admits that the trend of rising arrears and possessions will continue over its three year forecast period but absolute numbers will remain relatively low.

The CML says the reasons for this trend are not absolutely clear and there may be a mixture of factors. The most notable, of course, is interest rates, which have worsened a little and hence influence these statistics. As the labour market looks less positive the build-up of personal debt will cause difficulties among some households. This seems like the perfect time to take advantage of some of the fixed-rate deals coming into the market and lenders are keen to reel in those consumers who have been feeling the pinch as they come to the end of their fixed-rate periods.

Hamptons International Mortgages director Jona-thon Cornell says Halifax started the ball rolling in the price wars with a competitive two-year fixed rate of 4.29 per cent.

This was after a consid-erable period of apathy, where it seemed reluctant to kickstart any of the competition. Cornell says: “This is the most interesting Halifax product for the past two years. Halifax’s rate profile has been boringly apathetic. Now, everyone else will have to respond. It is sure to have a big impact on the residential market.”

Already lenders have started to respond to Halifax. Derbyshire, Alliance & Leicester and Abbey all have competitive fixed rates, ready to pull in the customers who have been sitting comf-ortably for the past two years.

John Charcol has launched a two-year fix at 4.28 per cent with free legals and refunded valuation, available up to 95 per cent loan to value. John Charcol senior technical manager Ray Boulger says: “At the end of the two-year deal, borrowers who choose our exclusive will revert to bank base rate plus 1 per cent, currently 5.75 per cent whereas borrowers with the Halifax will revert to their SVR which is currently 1 per cent higher at 6.75 per cent.”

He adds that at the end of any fixed rate, borrowers will want to reassess, quite rightly, their options. Alliance & Leicester’s current policy is to allow existing borrowers to switch to any of their current new business rates, subject normally to paying a transfer fee of 250, plus any product fee. Skipton Building Society’s two-year fix at 4.29 per cent has no application fee and no extended tie-ins.

It is not only the residential mortgage market though that is offering some delectable fixed rates at the moment. The buy-to-let mortgage market is also throwing some delights to landlords. Chase de Vere Mortgages communications director Nick Gardner says National Counties has launched the cheapest-ever five-year fixed-rate BTL mortgage at just 4.69 per cent, with an arrangement fee of 495.

He says: “It is a bit of a landmark deal because it shows that lenders now pricing BTL products at a similar level to ordinary residential loans, when for years they have been considerably more expensive.”

Savills Private Finance director Simon Jones says many borrowers are wondering whether they should act now or wait for further cheaper fixed-rate mortgages. But he doubts that anyone can go any lower than the rates at the moment. He says: “There are some fantastic rates at the moment. It’s crazy. I suggest you grab them while you can.”

No one will be able to match Britannia’s all-time low from two years ago but as Cornell points out, it only takes one well-loved resid-ential lender to get the ball rolling and kick some life into what has been so far this year a flat and dull mortgage market.

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