Fixed rates fined tuned as rise looms

Mortgage lenders were this week frantically pulling and re-pricing their cheapest fixed-rate deals as the City braces itself for an interest rate rise, possibly next month. On Wednesday the Bank of England surprised everyone by revealing it came within a whisker of raising interest rates this month. Later, a poll of 35 economists showed 25 of them predict the bank will next month announce the first increase in borrowing costs for almost four years.

"Loads of fixed rates have been pulled this week and are being repriced thanks to what looks like an imminent rate rise," says Simon Tyler at mortgage broker Chase de Vere. "However, we are recommending Abbey National's five-year fix at 4.69%, with an arrangement fee of £199 and redemption penalties only within the term."

The Abbey deal requires a minimum deposit of 5% and is also being recommended by fellow mortgage broker Charcol. It's probably being snapped up pretty quickly but brokers have been told it will still be available this weekend. There is a good three-year fix from Bank of Ireland Mortgages at 4.45% (minimum deposit 5%), but if some economists are right in predicting base rates will go from their current 3.5% to perhaps 4% and then come back down again, then discounted rate deals look pretty good, said Mr Tyler.

Woolwich this week improved one of its already attractive discount deals - it's now offering a 2.35% discount for two years (was previously 2.25%), giving a pay rate of just 3.19%. There is £295 arrangement fee (£99 for existing customers). Woolwich has withdrawn its flexible fixed rates and raised them by around 0.2% - the typical mark-up we are seeing from most lenders on their fixes as a result of this week's events.