Longer fixed rate mortgages are very attractive

Despite the base rate remaining low following the Monetary Policy Committee's decision to maintain it at 0.5 per cent for the 34th consecutive month, mortgage rates are on the up.

According to independent mortgage adviser John Charcol, the cost of tracker mortgages and, to a lesser extent, short term fixed rate deals has risen in the last few months as a result of uncertainty in the Eurozone.

Some trackers have increased by as much as one per cent as lenders' funding increases in cost, he explained.

However, he suggested that as the base rate looks set to continue at 0.5 per cent for some time, those looking for mortgages could get a great low rate deal if they fix for five or more years.

"With the fall to new all time lows in gilt yields and swap rates, the cost of five-year fixed rate mortgages has actually fallen over the last six months, with rates starting in the region of 3.5 per cent," Mr Charcol said.

"Thus, despite the outlook for bank rate remaining very benign for several years, five-year fixed rates look attractive for borrowers."

Catherine Hearnden, director at MyMortgageDirect, agreed that there are still some good mortgage deals to be had.

However, she explained that in the majority of cases, these are only available to those who can afford a larger deposit.

People should also be careful to think hard about what they will be able to afford on a monthly basis so that they do not overstretch themselves with a mortgage they cannot afford to repay, especially if their circumstances change.

A lot of the ups and downs on the housing market are to do with perception and confidence, with many people not moving because they feel uncertain about the future and until this changes property is likely to be in a lull.

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2012-01-13 13:03:39 © Moneyextra.com