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Interest rates hit a dizzy LOW; Finance Doctor.

Byline: By Tim Twiddy

SO the downward trend in interest rates continues and we have reached the dizzy lows of 0.5 per cent.

It is now almost inconceivable that we won't soon have a zero interest rate although that doesn't mean that banks will be giving away money for nothing.

The fact is the Government is still trying to twist the banks' arms to get them to lend any significant amount of money. With rates effectively as low as they can go, it makes you wonder about the merits of a variable or tracker mortgage rate. If your rate is variable and reflects the Bank of England base rate, which is as low as it can go, then there is no chance of your rate going down. It can only stay the same or rise.

If there is no chance of your variable rate going down why wouldn't you opt for a fixed rate because although it can't go down either, it also can't go up!

Of course the reason you might take a variable rate is because it had a lower starting rate than a fixed rate over the same term but if they are similar rates a fixed rate is starting to look attractive.

If you do decide on a fixed rate, the next issue is how long do you fix it for? If you are settled in your home and expect to be there for a long time then a long-term rate for ten years could be great value at current rates.

If you are not too settled then you might be more comfortable with a shorter rate as just about all the fixed rates have penalties that last as long as the fixed rate itself.

There are competitive fixed rates at the moment over both long and short-terms.

Some of the better, fixed mortgage rates available at the moment are listed below:

A TWO-YEAR FIXED RATE:

If you are only looking for a short-term rate then HSBC has a phenomenal two-year fixed rate of just 2.89 per cent. The only major drawback of this deal is a nonrefundable booking fee of pounds 1,499 so you want to be sure you fit the criteria for the loan before you apply as you could be out of pocket if you are declined. There is also an arrangement fee of pounds 500 on loans in excess of pounds 100,000. The maximum loan is pounds 500,000 and the maximum amount you can borrow is 60 per cent of the value of the property. The early redemption penalties start at two per cent and reduce to one per cent in the second year.

A FIVE-YEAR FIXED RATE:

Northern Rock has a five-year fixed rate of 4.69 per cent until April 1 2014 followed by the standard variable rate, currently 4.79 per cent. The arrangement fee is lower at pounds 995 but the penalties are higher at four per cent of the loan amount until the fixed rate ends. The maximum amount you can borrow is 65 per cent of the value of the property and the product is portable.

Compiled by Tim Twiddy of Atlantic Investors, a chartered financial planning company. Freephone 0800 163659.

There are thousands of mortgage deals available and they change frequently so it makes sense to take independent advice about which deal is best for your needs. Your home may be repossessed if you do not keep up repayments on your mortage.
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Title Annotation:Features
Publication:Birmingham Mail (England)
Date:Mar 11, 2009
Words:582
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