Fixed rate mortgages could fall further still following the UK’s vote to leave the EU, according to John Charcol senior technical manager Ray Boulger.
The past week has seen HSBC launch a two-year fixed rate at just 0.99 per cent, albeit with a £1,495 fee.
Boulger says: “The price of government stock will rise, hence yields will fall. This is partly as a result of a flight to safety as the market perceives increased risk but also because it now expects interest rates to remain low for longer.
“Uncertainty over economic activity and indicators will probably extend for at least the minimum two-year period during which our exit negotiations will take place.”
He adds: “The Bank of England base rate and other short-term interest rates are unlikely to change much, simply because they are already close to zero.
“A fall in gilt yields will reduce the cost for lenders of longer term funding and hence open the door for even cheaper fixed rate mortgages.
“Most mortgage lenders did not pass on much of the pre-referendum reductions in rates so we can now expect to see a bit more price competition, especially in the longer term fixed rates.”