Drop in rates predicted

The Bank of England will be forced to drop interest rates before too much longer as the economy continues to falter, mortgage experts said this week.

Ray Boulger of John Charcol, the UK's largest independent mortgage adviser, says cut from 4.75% is inevitable. "Fixed rate mortgages are becoming cheaper by the day, as a result of which borrowers - particularly those coming off the historically low fixed rates of summer 2003 - will experience much less of a payment shock if they want another fixed rate."

But before homeowners jump, Mr Boulger says the cost of fixed-rate mortgages is likely to fall further and they should focus on tracker or discount mortgages. Research from Mortgages Direct shows that an increasing number of borrowers have opted for tracker and variable mortgages, with an 8% increase in applications for tracker mortgages and a 6% increase of mortgage applications for variable mortgages in May, compared with April 2005.