Rate cut belief fuels a boom in tracker rates

Despite the recent turmoil in the marketplace - and the knock on effects this is likely to have on consumers - brokers appear to be feeling more positive about the prospects of a cut in the Bank of England Base Rate over the coming months, according to research issued by GE Money Home Lending.

Almost 90% of brokers in the UK now believe that interest rates have peaked, with 43% claiming that they believe that rates will fall as soon as February next year. This optimism also appears to be having an impact on the advice mortgage brokers are giving consumers, with discounted and tracker rates beginning to increase in popularity.

Since the beginning of August this year, fixed rates accounted for almost three quarters of all mortgage products being recommended by brokers (72%) - mainly as a result of the significant number of consumers claiming to be concerned about the prospect of taking out a mortgage or remortgaging because of the recent problems in the market.

However, when looking forward to the next three months and into 2008, the number of brokers advising discount and tracker products rises by an astonishing 120%, whilst fixed rates - although still accounting for the majority of sales - are expected to fall by a third.

Gerry Bell, Head of Mortgage Marketing, GE Money Home Lending, said: “Our latest research shows an element of growing confidence from brokers, with 9 out of 10 believing that interest rates have already peaked at their highest level. At the same time the research has found that almost half of consumers (43%) are worried about securing a good mortgage or a re-mortgage due to the recent credit crunch. It is therefore crucially important that lenders continue to work closely with brokers to understand their customers’ needs and concerns, ensuring we are providing a range of affordable products options which will allow them to make informed choices in the current environment.

“Consumers and brokers alike have clearly been concerned by the recent stress in the financial sector and our research indicates that the market is now being boosted by a possible decrease in interest rates in the coming months. This will also be welcome news to those homeowners currently coming to the end of a fixed rate product who are concerned about re-mortgage products and rates that will be available to them.”

GE Money Home Lending First National product range:

In reflection of current conditions, GE Money Home Lending has lowered its fixed, discount and reversionary rates. Some of the rates are as follows:

1 year discount rates starting from 6.94% on NP+
Reversionary rates reduced by maximum of 0.55% on UL and L2M at 75% LTV
In addition we have made the following changes:

No HLC up to 85% LTV
Completion fee now £995
ERC 1 & 2 year discount now 7%/6%
ERC 3 year fixed now 7%/6%/6%