More than half of fixed rate mortgages being taken out at the moment are for three and five year periods, as homeowners seek longer-term security. Two year fixed rate mortgages
have lost favour recently, according to new market data from national brokers Mortgageforce, with 56 per cent of fixed rate mortgage
customers now opting for the longer terms.
Despite the number of homeowners on tracker mortgages
currently benefitting from record low interest rates
, bringing some monthly payments down by several hundred pounds, suspicions amongst industry analysts that rates have now bottomed out and are set to rise again are pushing more people towards the two year or five year fixed rate mortgage
Mortgageforce has found that the most popular deals are Abbey mortgages
, that are offering a three year fixed rate mortgage at 4.14% with the £995 fee, free valuation and no legal fees on remortgages
, and the facility to overpay up to 10% each year without penalty, available up to 70% loan to value (LTV). Alliance & Leicester mortgages
are also proving popular, the broker said, offering a five year fix at 4.79%, with a £995 fee and refund of valuation, available up to 75%.
Technical manager at Mortgageforce, Katie Tucker, comments: "Two year fixes were always the favourite, or trackers when Bank Rate is widely expected to fall, but this rush to commit long term shows that consumer attitude has turned a corner."
She explained that borrowers have been weighing up the likelihood of mortgage lenders
cutting rates further, alongside the chances of the Bank of England increasing the base rate over the coming few years. Combined with falling house prices, the equity they hold in their properties, and job security, these factors are causing them to commit to longer terms.
But, she said, it is not the case that the longer term deals immediately offer better value than two year fixes, but borrowers are nonetheless choosing them over shorter terms in order to gain some sense of security through the recession.
"Even many borrowers benefitting from their lenders' very low standard variable rates are choosing to switch to a fixed rate now that will keep their payments low and give better value if the variable alternatives start to increase," Ms Tucker continued.
"We have also seen more ten year fixed rates being taken this month than ever before, as prices are so historically competitive," she added.Get mortgage quotes and advice »
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