Gilts edge fixed-rate loans down

The dramatic falls in gilt yields could benefit homebuyers looking to fix their monthly mortgage payments for quite a long period - 10 years or more.

Ray Boulger at mortgage broker John Charcol says it is quite likely we will see the rates on 10-year and 25-year fixed-rate mortgages coming down over the next few weeks, and more lenders entering this market.

The cheapest 10-year fixed-rate mortgages are offered by the West Bromwich and Leeds building societies, both of whom are charging 4.69%. But Mr Boulger said there was clearly scope for rates to fall below 4.5%. Meanwhile, there may be potential for Cheshire building society to lower the rate on its 25-year fixed-rate deal, currently priced at 4.99%.

It may take a little time for lenders to react to gilts market turmoil, so anyone considering taking out a long-term fixed-rate mortgage would be well advised to hold off for a while to see if the rates come down, added Mr Boulger.

Meanwhile, if you're thinking about buying one of National Savings & Investments' fixed-rate savings products such as its children's bonus bonds, there's an argument for moving quickly. In the past, NS&I has cut the interest paid on these sorts of products on the back of falls in gilt yields. It said on Thursday that it was keeping a close eye on what was happening.

Colin Jackson at Ilford-based independent financial adviser Baronworth says the recent events are bound to have an impact on gilt funds (which people often invest in because they are perceived to be low risk) and possibly on guaranteed bonds, which from time to time invest in gilts.