Fixed rate mortgage deals on the increase

Fixed rate mortgage deals on the increase

05 December 2009 / by Andy Davies

Fixed rate mortgage deals appear to be returning to the market, with the number of short term deals increasing significantly since earlier this year.

Data released by Moneyfacts.co.uk shows that the number of short term mortgage deals has increased by as much as 38 per cent.

For example, in April there were 250 two year fixed mortgage deals on the market, but this has since increased to 405.

Meanwhile, there are now 352 available products for three year fixed mortgage deals – up from 274 in April, while the number of five year deals has seen a 12 per cent increase since April with 297 products now on the market.

Moneyfacts.co.uk claims that there are signs from mortgage market indicating that credit conditions are easing, which has resulted in lenders being more willing to lend.

Commenting, Michelle Slade, spokesperson for Moneyfacts.co.uk, said: "In such uncertain times, borrowers and lenders alike seem to prefer shorter term deals, where changes can be made relatively quickly if market conditions change dramatically.

"Lenders appear to be discouraging borrowers from taking medium to longer term deals by charging higher rates, as extended periods of repayment, together with uncertainty over the economy in the medium term, bring a higher risk of default."

However, Ms Slade warned borrowers that if lenders maintain the increased margins they have placed on mortgage deals, this short-term view "is likely to prove more expensive for borrowers" in the long-term.

"Increased competition in the two year market has increased the competitiveness of the deals available, but at £928, the average arrangement fee remains more than £100 higher than on longer deals."

Encouraging borrowers to consider a five year fixed rate deal, she added: "By opting for a five year deal, borrowers are likely to benefit from a more stable mortgage market when they come to remortgage. Increased equity in their homes from rising property prices will increase their chances of being eligible for a more competitive deal at a lower LTV band."

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