Mortgage News Fixed Rate Mortgage Demand Up As Interest Rates Expected To Remain Static 3389

Fixed rate mortgage demand up as interest rates expected to remain static

03 June 2009 / by Rachael Stiles
Nearly two thirds of Brits were planning to fix their mortgage rate in May, as the majority of people expect the base rate to stay at 0.5 per cent again tomorrow.

Three quarters of respondents to research conducted by Abbey said that they do not think the base rate will fall again, pushing up the demand for fixed rate mortgages as homeowners rush to protect themselves from future rate rises.

Meanwhile, the demand for variable rate mortgages has halved since January, when 28 per cent of people said they would opt for a lender’s variable rate. In May, this number fell to just 15 per cent.

Abbey says that borrowers are “getting the message” about interest rates, and urges that now is the time to fix while they are as low as they are going to get.

The last six months has seen a rise in popularity of tracker mortgages as borrowers benefitted from plummeting interest rates, sometimes seeing their monthly interest payments fall by hundreds of pounds.

But, for the first time since the beginning of the year, Abbey has detected a rise in the number of people planning to choose fixed rate mortgages, with 60 per cent of people intending to do so in May, compared to 52 per cent in January.

Abbey has found that two year fixed rate mortgages are the most popular choice, with 21 per cent of borrowers opting for fix for two years, while they are still wary about how long it will take interest rates to go back up.

Abbey expects demand for longer term fixed rate deals to increase as borrowers expect them to rise again. Already, it has seen the number of borrowers opting for 10 year fixed rate mortgages double, while 36 per cent have chosen a fix of between three and 10 years.

“Fixed rates are firmly back on the agenda for those looking to remortgage,” said Nici Audhlam-Gardiner, director of Abbey mortgages.

“The last few months of 2008 saw a huge focus on the Bank of England’s Monetary Policy Committee as rates shot downwards each month. As mortgage borrowers realise that variable deals will no longer fall further, it seems that many are now trying to work out when rates will rise again and how long to fix their rate for.”

Despite the current benefits of being on tracker mortgages, which have seen interest rates fall with the base rate, Ms Audhlam-Gardiner warns borrowers against waiting too long to fix, “as rates as low as these won’t last forever.”

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Written by Editorial Team