More than 65% of mortgage enquiries online have been for fixed rate deals since the Bank of England raised its base rate, according to research by Fair Investment. On January 11th, the base rate was raised by ¼ per cent to 5.25%, and the increase had a significant affect on the type of mortgage people were applying for. In the weeks running up to January 11th, around 50% of all mortgage enquires online were for fixed rate, but after the Bank of England's announcement, this went right up to 65%.
"In real terms, the increase in the base rate will add around £25 to monthly repayments on a typical £120,000 mortgage," explains James Caldwell of fair Investment Company. "And because people are concerned that the Bank of England may put up rates again, a lot of people are starting to look at the fixed rate deals on the market so that they can be in more control of their monthly outgoings. With a fixed rate deal, you know where you are each month, and can plan your finances accordingly."
Many lenders are starting to take advantage of the increased popularity of fixed rate deals, and some are charging higher fees for setting up a new fixed rate mortgage, but there are still a number of reasonable deals on the market, with some lenders offering five and ten year fixed deals, and others even offering very long fixed-rate mortgages such as the 20 and 25-year deals offered by some lenders.
"Traditionally, borrowers have been put off long-term loans because they are worried that their situation will change or that rates will go down once they are locked into a deal," Mr Caldwell continued, "but now people are much keener to sign up for a long term deal, especially when many offer penalty-free "windows" after a few years, so people can bail out if they want to.
"Some banks and building societies have put their fees up because they know more and more people are desperate to get a fixed rate deal. So if you are looking to remortgage on a fixed rate, you should compare a number of deals and make sure you are fully aware of all the costs involved before signing up."
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