Fixed rate mortgages to fall further?

Updated: 

Another three years of rock-bottom interest rates looks likely: new Bank of England Governor Mark Carney claims rates will not climb again until unemployment slips to 7%.

Realistically, that won't happen until 2016 at the earliest. So, could fixed rate mortgages fall further, saving home owners more cash, longer term?

Fix now or later?

Difficult to say, but the prevailing feeling seems Yes. Rates on many fixes are already at historic lows, witness HSBC's new two-year 1.49% offer. Then there's Chelsea Building Society's two-year 1.64% deal. For a five year deal, there's 2.59% on offer from the Norwich & Peterborough.

Bear in mind that behind these astonishing headline rates lurk some monstrous fees. HSBC is charging a killer £1,999 up-front payment for its 1.49% two year fix, for example.

Deals coming

But Jonathan Harris, director of mortgage broker Anderson Harris, told the Telegraph he expects more competitive deals to follow. "They may already be at historic lows but if lenders are to convince borrowers to opt for a fix when interest rates are highly unlikely to rise, then pricing needs to be attractive."

He adds: "Borrowers who prefer the certainty of a fixed rate and particularly those looking for something beyond the next three years when it is less certain what will happen with interest rates, should consider a five-year fixed-rate deal."

Behind talk of better rates and market 'stability', the first-time buyer, in particular, has to be able to afford a property in the first place. The gush of warmer sentiment towards cheaper long-term interest rates does little to rein in prices.

Affordability woes remain

Talk of cheaper mortgages may fuel house values higher, particularly in the South East where house builders are seeing greater sales interest in the last quarter. (See Bellway Homes announcement this morning).

For the rest of us with existing house debt, it's yet more time to pay it down super-cheaply (though you suspect some in the Government wouldn't mind another binge on home equity, stimulating the economy).

Carney's news remains misery for savers, who far outnumber those with property debt.