Variable Rate Mortgages Took Larger Market Share In July
31 August 2009 / by Rachael Stiles
The mortgage market gave up a significantly larger share to variable rate deals in July than the previous month, figures from mortgage broker John Charol show.
While fixed rate mortgages remain the most popular type of home loan, their popularity has been tarnished in recent months as they have become more expensive.
Variable rate mortgages, such as tracker or discount mortgages, have experienced a rise in popularity as a result, and in the wake of a plummeting base rate, accounting for 35 per cent of all mortgages through John Charol in July, compared to almost half that in June, when they represented 17 per cent of the market.
The John Charcol Index suggest that fixed rate mortgages have fallen out of favour with some borrowers who have been throwing in their lot with variable rates, rather than opting for the security of fixed rates.
Commenting on the recent sea change in the variable rate mortgage arena, Ray Boulger, spokesperson for John Charcol, said: “The popularity of fixed rates with John Charcol clients has been on a roller coaster since the beginning of last year.
“In January 2008 only 25% of our clients chose a fixed rate but that percentage rose rapidly and 4 months later was up to 64%, before collapsing to a low of 14% in October. After a modest increase from this low until the end of 2008 there was a surge in the first 6 months of this year, with the fixed and capped rates taking a record 84% over the 4 months to June of this year.”
But, the rapid increase in fixed rates in June reduced their value in protecting against future rate rises, Mr Boulger said, so the mortgage broker began advising more customers to consider a discount or tracker mortgage.
The figures also show that borrowers taking out large loans were more likely to choose a variable rate, usually a tracker, often because homeowners have been seeking the flexibility to take advantage of falling rates and overpay on their mortgage.
“We have seen a further dramatic fall in the take up of fixed rate mortgages this month and it looks almost certain that fixed rates will take less than half of the market in August, both by case number and volume,” Mr Boulger said.
© Fair Investment Company Ltd