Home owners and potential buyers should opt for a fixed rate mortgage deal now, before interest rates start rising again, mortgage experts John Charcol have warned.
According to the analysis, the current trend for lowering fixed rate mortgages
could soon be turned on its head as a result of the Government's bids to rescue the economy.
So far this month a range of mortgage
providers including Abbey
and Nationwide have announced new reduced fixed mortgage rates, and, according to John Charcol, Barclays'
mortgage arm, Woolwich will be launching a market leading four year fixed rate deal on Friday.
However, these rates will be short lived says John Charcol, as gilt yields for maturities of five years or more have fallen dramatically since the Government's launch of quantitative easing, and swap rates return to the levels they were at prior to the announcement.
The mortgage experts said: "Swap rates have in general gone back up to their level prior to the quantitative easing announcement and some shorter dated swaps are actually now a little higher.
"This is bad news for fixed rate mortgage pricing and hence the expectation that we will see some lenders start to re-price upwards as early as next week."
Yesterday's failure of the Government's gilt auction will also contribute, says John Charcol, and the recently publicised disagreement between the Bank of England Governor and Gordon Brown over important policy, "will be a major worry for the markets, especially in view of the huge amount of money the Government needs to raise for at least the next two years."
Liberal Democrat shadow chancellor Vince Cable said: "If there is one lesson the Government should have learnt by now, it is that creating uncertainty is economic masochism.
"Government dithering has already caused massive damage to Britain's banking sector and the clear disagreement between Brown and Darling over Government borrowing threatens to further damage the public finances." Get mortgage quotes and advice »
© Fair Investment