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Working Lunch Thursday, 20 March, 2003, 16:24 GMT
Time to get a fix?
Mortgage companies have started to withdraw some of their most competitive loans because of a rise in borrowing rates.

That's despite the fact that interest rates have been falling - the base rate was 6% three years ago and is now 3.75%.

But some mortgage lenders are about to raise the cost of their new fixed rate mortgages.

Among those withdrawing their current fixed rate mortgage deals are:

  • Woolwich
  • Coventry Building Society
  • National Counties Building
  • Lambeth Building Society.

    So are fixed rate deals in general about to become more expensive?

    "The interest rates we've got right now are very, very close to, if not at the bottom of, the interest rate cycle," says broker Pat Bunton of London & Country Mortgages.

    Pat Bunton, London & Country
    Pat Bunton: Rates expected to rise
    "What we've seen over the last couple of weeks is that money market rates have started to rise again, which is a reflection that they're expecting interest rates to rise in the medium term.

    "As a result of that, as existing deals come to an end, we are expecting lenders to replace them with slightly higher rates."

    But Pat believes there are some good offers to be picked up, even in that climate.

    Good value

    "Most analysts are predicting that the Bank of England base rate over the next couple of years will be slightly higher than it is now - somewhere in the region of 0.5%.

    "Viewed against that, some of these fixed rates that are available in today's marketplace look very good vaue indeed."

    Some of the lower fixed rates currently available include:

  • Lambeth Buidling Society - two years at 3.25%
  • Alliance & Leicester - two years at 3.59%
  • London & Country - five years at 4.05%
  • Bristol & West - five years at 4.25%.

    But be careful before you snap up a fixed rate.

    Because the rates are so low, even a small rise in the interest rate could mean a rather large rise in your monthly bill.

    Check out the BBC's mortgage calculator to see what it could mean for you.

    Also, make sure you understand whether there are any exit penalties and what other tie-ins are hidden in the small print.

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