Hi

I wonder if this will turn out - with hindsight - to have been a significant moment....

The Halifax cut rates on ten of its most popular mortgages yesterday, with a two-year fixed-rate loan falling from 7.24 per cent to 6.67 per cent.

Some mortgage pundits started to talk about the months of lenders relentlessly increasing their rates could be coming to an end.

Light at the end of a dark tunnel? Or wishful thinking?

The reason that fixed rate mortgages have recently reduced in price is because of a fall of c50bps at the short end of the money market yield curve. Lenders are simply passing on this reduction in current prices. Market sentiment is now such that future BoE base rate increases are deemed unlikely (something that was thought a real possibility 3/4 weeks ago). Consensus is the next move will be down, but not soon. Expect the price of fixed rate deal to move down over the next few months, but maybe not dramatically so. Whether these deals will be good value for money will depend on your view as to where Bank Base Rate is going to go (and how quickly). Remember, the money market makers are speculating on this to and this is reflected in the yield curve (though not a completely logical market as deal makers only make money when there's market activity so have a habit of creating it when there's no obvious cause....). But your betting your own view against theirs,


Paul

Wise old saying!

Beware the light in the tunnel -

It may be an oncomming train !!!

Hi DW

Wise indeed!

However, the latest Halifax is interesting....

Key facts

• House prices fell by 1.7% in July. This was smaller than the falls in both the previous two months – May (-2.5%) and June (-1.9%).

• The UK average price is more than one-third higher (34%) than five years ago. The average price in July 2008, at £177,351, was £44,980 higher than in July 2003 when the average price was £132,371.

• House prices in July were 8.8% lower on an annual basis. UK average prices have returned to the level they were at in June 2006.

• The housing market is underpinned by a solid employment market and low interest rates. The labour market is the key driver of the housing market. The number of people in employment increased by 61,000 over the three months to May compared with the previous quarter and by 413,000 over the past year to a record 29.59 million.

• The average mortgage rate paid by all borrowers - i.e. the average rate on outstanding mortgage loans - fell by 21 basis points during the first half of 2008 from 5.97% in December 2007 to 5.76% in June 2008. This fall occurred despite a rise in the average mortgage rate paid by new borrowers in recent months.

cheers