UK homeowners still choosing variable rate mortgages

26 June 2003
Over half of UK homeowners still have variable rate mortgages, according to figures from Legal & General.

The mortgage provider's Moving Intentions Survey Found that 49 per cent of homeowners said they paid a variable rate of interest for their mortgages which can change immediately when base rates rise or fall, while a further nine per cent said their mortgages are adjusted on an annual basis to take account of interest rate changes in the intervening period. Just 37 per cent if those surveyed said they had opted for a fixed or capped rate mortgage.

Over half of those questioned (54 per cent) have put arrangements in place to ensure their mortgages will be paid off. 46 per cent have repayment mortgages that ensure the capital is paid off bit by bit over the term and another eight per cent are paying additional lump sums to reduce the balance of their loans.

Stephen Smith, Legal & General's Director of Housing Marketing said, "The first fixed rates were available to UK homebuyers in 1989. They have therefore become popular among British homeowners in a relatively short space of time.

"However this popularity extends very much to shorter term products, up to five years in the main. It will be some time before the UK homeowning public is willing to lock themselves into long term rates, particularly 25 year rates.

"History tells us that it's big changes in interest rates that can precipitate problems for homeowners and whilst the outlook for rates is benign, fixed rates are one of the best ways of guarding against this."