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Fixed loan rates tumble after gilt sale fails

Brokers have called the floor in fixed-rate mortgages as gilt yields reacted to the Government’s first auction failure in nearly a decade.

Ten-year gilt yields rocketed after the failure of the Government’s £1.75bn auction of 4.25 per cent 40-year Treasury gilts last Wednesday, with take-up of 93 per cent – the first UK gilt auction failure since 2002.

John Charcol senior technical manager Ray Boulger says the failure made five-year gilt yields higher than before quantitative easing was announced, bringing with it a new low for fixed-rate mortgages. He says: “Rates are on the floor now, which means it is probably time to consider fixing for five years.” He says fixed rates may remain low for some time.

Woolwich has cut its five-year fix for borrowers with a 30 per cent deposit from 5.29 to 4.79 per cent, with a £995 fee, and its four-year fix with a 40 per cent deposit from 4.29 to 3.99 per cent.

Email Mortgages managing director Michael White says: “Fixed rates have been improving the last few weeks, the problem for advisers is predicting how long they will bump along the floor. It is all about timing, the fear is that people will get greedy on their low variable rates and miss out on a low fix.”

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