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in theory, at least, all other things remaining equal, the amount you pay over an arbitrary fixed rate term is expected be pretty close to the amount that you would pay with a floating / tracking rate
That's an interesting theory (perhaps one for another thread).
You could make the counterargument that the High Street banks are mostly funded by deposits rather than RMBS or bilateral facilities, and the correlation between Bank Rate and deposit rates can be low. For a High Street bank then, linking its asset book to Bank Rate might add basis risk rather than remove it. Therefore structurally incentivised to offer better fixed rates?
Can't be a coincidence that the 5Y fixed best buy table is now all High St banks rather than building societies etc as it was 6-12 months ago.
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NickCJ
@NotThamesWater
It's worth remembering that (in theory, at least, all other things remaining equal) the amount you pay over an arbitrary fixed rate term is expected* be pretty close to the amount that you would pay with a floating / tracking rate, plus a arrangement fee premium.
Just like you, the banks are taking a view of rates rising / falling, and setting the fixed rate accordingly. Personally, I don't feel I can second guess what a bunch of full-time analysts when it comes to rate moves, given the asymmetry of information.
I like fixed, as I can budget income against outgoings with more certainty. Ours ends in August next year, with an option to take a deal in February. I reckon we'll be waiting until August, as we want to pay a bunch down prior to rates heading upwards.
* conveniently ignoring the difference between expectations led pricing, and supply / demand pricing, even if there is convergence over the longer term.