January may well turn out to be the bottom of the UK mortgage market with tracker rates falling to record lows. Figures released by the Bank of England show a fall from 3.92% in December to 3.63% in January for tracker mortgages which carry a 25% deposit. There was also a significant drop in two-year fixed-rate mortgage arrangements which now stand at 3.97% (a six-year low) against a high of 6.35% back in June 2008. So which direction will the UK mortgage market move in the short to medium term?

There is no doubt that 0.5% base rate in the UK are having an impact upon mortgage rates in general, at least in the short term. Even though those looking to put down a 25% deposit on a new property will have seen their mortgage rates drop dramatically over the last few months, the situation is not as bright for those looking to pay smaller deposits.

However, before we all start to believe that the boom times are back and the mortgage industry is our friend there has been a return of the 90% mortgage. Figures from the Bank of England confirm that the number of 90% mortgage deals available increased by 26% in January which is worrying for the authorities. If the UK property market, or the UK economy in general, was to take another downturn those who have taken up 90% mortgages would be at risk of default and we could return to the sorry mess we saw just a few months ago. If mortgage defaults were to pick up then mortgage rates would rise pretty quickly!

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