Variable Mortgages On The Up But Fixed Remain Top Choice
19 September 2008 / by Rachel Mason
The number of borrowers opting for variable rate mortgages has gone up from 24 per cent to 35 per cent in the last quarter.
According to Legal & General’s Mortgage Purchase Index series, more than a third of residential borrowers took out variable rate mortgages in the last three months, compared to less than a quarter in Q2.
Fixed rate mortgages mortgages actually saw a drop from last quarter, from 75 per cent of all home loans to 63 per cent this quarter, but are still the clear front runner.
“As suspected, the popularity of fixed rate mortgages peaked last quarter when we found that three-quarters of borrowers were taking this type of mortgage, compared to 63 per cent in Q3,” explained Stephen Smith, Director of Housing at Legal & General.
“Trackers will have attracted greater attention as forecasts of base rate cuts become more prominent. The popularity of variable rates has also perhaps been boosted by the number of borrowers sticking with their lender’s standard variable rate when they came to the end of a deal rather than remortgaging straight away.”
And it seems variable and tracker rate mortgages have become even more popular with buy-to-let borrowers over the past 3 months. In Q2, 58 per cent of buy-to-let home loans were fixed rates and 41 per cent were variable. In Q3 this had turned around with variable becoming the most popular type of mortgage, representing 55 per cent of buy-to- let loans while fixed dropped down to 43 per cent.
“Fixed rates are nowhere near as popular for buy-to-let mortgages as they are for residential mortgages. Many of the more recent exclusive mortgages agreed with lenders through the Legal & General Mortgage Club have been trackers rather than fixed rates,” said the report.