The competition for more business among UK lenders continues to heat up, and for good reason.  Feverish talk regarding the possibility of a near base rate hike has subsided, wages remain low, and jobs are still in short supply.  Lenders are planning a focused strategy on how to play the next several months, while the ball is still very much in the court of the borrower.

Melanie Bien, director of independent mortgage broker Private Finance, remarked, “Several lenders, including Nationwide, Halifax, Northern Rock, Woolwich and Yorkshire Building Society, have reduced their fixed rates over the past couple of weeks. But the main reductions have been on shorter term fixes of two and three years, rather than five-year deals.

“Lenders are also conscious that they need to balance their lending book.  Traditionally, they have always sold a good number of shorter-term fixes and most seem keen to ensure that remains the case. So while borrowers may be looking for longer-term security, lenders are keen to sell the shorter-term deals.

“The vast majority of our clients are still opting for base-rate trackers – particularly those which are penalty free or have a 'switch to fix' option. Others are opting for five-year fixes because they give security for a reasonable period of time at very competitive rates. Two-year fixes are not proving particularly popular”

All estimates are pointing towards a long drawn out road to recovery which includes little chance of the base rate increasing anytime soon.  That being true, many short term products are not being scooped up like longer term products are.