Good time to fix or not?

[Ronny]

Well it's not going to be a quick answer! To understand it you need to have a fairly good understanding of what is driving interest rates at the moment ,and that is the state of the economy and spending on the high street. Retail accounts for 67% of the UK's GDP(effectively its economy) so spending is essential.

Inflation is no longer a risk, deflation is. Most of the commodity traders have made what they can and have dumped commodities causing all the prices to crash. Not even a cut in production of 2.2 million barrels yesterday can support oil now. So the cost of living will become remarkably cheaper. Interest rates will probably bottom at 0.75% to 1%, but much of that will depend on whether or not the UK consumer starts spending. If they don’t rates could fall lower still sending sterling into oblivion. By the end of the first quarter of 2009 you should be looking to an independent mortgage broker to consider what fixed rates are available.

I suspect many consumers will allow the massive savings in mortgages to bed in before realising they are indeed a lot richer at the end of the month. Once the tail of expensive inventories for oil/wheat etc fall out, prices will plummet and consumers will consider they are indeed ‘safe’. Only at that point will spending begin in earnest. But by then however, the average homeowner will be at least £500 per month better off when all this is factored in.

That confidence will probably embed itself in the 'February sales' and will bring a short term boost to the markets. However the poor management of the economy will carry its sting in the tail (redundancies, property excesses, company failures, repossessions etc) and short term boosts will be followed by short term losses for the rest of the year, but the trend will be upward. Remember we have an election in 2009. So for the time being forget a tracker or fixed and go for the standard variable rate so you can move quickly when the deals come through in the new year.