Paul Short considers mortgage interest rate management

Many of our clients are in Fixed Rate Mortgage deals which are coming to an end this year. The recent credit crunch has exacerbated a deteriorating climate for borrowers with several interest rate increases during 2007.

The Bank of England has already cut rates to 5.25% with further reductions likely in ensuing months to try and prevent recession. Their manoeuvrability may be hampered by inflation pressures such as escalating oil prices.

What does it mean for our clients? We were keen for our clients to lock in to historically low interest rates when the going was good.

Borrowers are now finding it difficult to lock into fixed rates, particularly those with indifferent credit records. A fall in house prices may reduce the equity available to be used as security. There is likely to be increased business failures and redundancies. Lenders are certainly being more choosy and may not always be prepared to pass on interest rate reductions to borrowers, especially if Libor rates remain high.

We would recommend that our clients on fixed rate schemes review their arrangements. There will be some good deals around. We would advise that our clients consult a mortgage broker. In my case I consult the Essex Mortgage Centre (Tel: 01245 398466; ). My colleagues will have their own contacts for you but the common message is to review your position in good time.

Date:4 April 2008