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BRITAIN'S lowest ever Bank base rate of 0.50% celebrated its first birthday this week, and while it has provided an easy ride for borrowers on cheap variable rate (SVR) mortgages, savers, however, saw their income almost wiped out.

Moneysupermarket.com's Hannah Mercedes-Skenfield says: "Many borrowers are sitting on extremely low SVR rates, which many took when fixed rate loans came to an end, and they have no incentive to move."

Nationwide BS confirms the trend, and in its latest market bulletin says: "Since mid-2009, there has been a steady increase in the proportion of new loans taken out at variable, rather than fixed, rates."

"In July, the proportion of new loans taken out on base-rate tracker or discounted variable rate deals hit a low of just 14%. By December, it rose to 39%, with fixed rate deals down from 80% to 54% in the same period."

Nationwide thinks buyers like variable rate loans because they want to keep more of their income each month. Figures suggest fixed rate loans cost 1.58% more than variable rate deals.

Lenders, though, are starting to cut the cost of fixed rate loans, and are launching them as a safe haven for borrowers unnerved by the sliding pound, general election jitters and the long-term implications of Britain's massive debts.

Post Office Mortgages' new range of 75% LTV (loan to value) loans includes a 3.19% tracker and two, three and five-year fixes from 3.89%.

Marco Hughes, Post Office's personal lending director, says: "If you're thinking about switching your mortgage, now is the best time to do it, before rates rise further. With many SVRs at or above 4%, there are already better deals out there."

Martijn van der Heijden, head of mortgages at HSBC, says: "Mortgage rates are difficult to predict over the next few years, and volatility may be unavoidable. Borrowers who can't absorb an increase of up to 3% on their rate should seriously look to fix payments."

HSBC fixed rate mortgages range from two years at 3.69%, to five years at 5.29%.

First Direct, HSBC's online subsidiary, has a new lifetime tracker mortgage (maximum LTV 85%) at 3.99%, currently 3.49% above the Bank base rate.

Borrowers with a 35% deposit (LTV 65%) pay 2.39%.

First Direct also levies no early repayment charge if borrowers want to get out, possibly when rates rise, and into a fix.

Santander, supplier of one in five new mortgages in 2009, is cutting rates on 80% LTV deals: A two-year tracker at 3.25% for two years, and a two-year fix at 4.95%, with pounds 995 fees, are for purchasers, rather than remortgagers.

In economic crises, variable rate loans can go wrong: Halifax SVR customers paid a stonking 15.4%, a record, in 1990.
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Title Annotation:Features
Publication:Wales On Sunday (Cardiff, Wales)
Date:Mar 7, 2010
Words:466
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