Mortgage expert John Charcol has seen an influx of fixed rate mortgage applications in March, as interest rates hit 0.5 per cent – the lowest it could go according to analysts.
According to its statistics, John Charcol saw a huge increase in the percentage of fixed rate mortgage
applications between December last year and March 2009. December saw 29 per cent of mortgage
applications for a fixed rate mortgage, compared to 80 per cent in March.
Between December and March, the Bank of England has cut interest rates four times, by a total of 2.5 per cent. However, interest rates have now been steady at 0.5 per cent for two months.
Ray Boulger of John Charcol said of the rush to fixed rate mortgages: "The increase comes as a result of a combination of factors, the most obvious being that with Bank Rate now at 0.5 per cent there is nowhere for it to go – the only questions being the timing and scale and speed of the increase."
And, according to Mr Boulger, the fact that a rise in interest rates is imminent, is making tracker mortgages
less appealing: "Another important factor is that historically huge margins above Bank Rate now being charged by lenders for new tracker mortgages means that the risk of being locked into an expensive tracker mortgage when rates go up outweighs the fact that initially a fixed rate is a little more expensive."
Another reason which could have been deterring first time buyers from the tracker mortgage is that they were not available with high loan to values (LTVs). "A third factor is that until recently there were no trackers available above 75 per cent LTV, and so borrowers wanting more than 75 per cent couldn't have a tracker if they wanted one," he said. Get mortgage quotes and advice »
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