Borrowers prefer trackers to fixed

Robyn Hall

May 11, 2010

According to Paragon Mortgages’ Financial Adviser Confidence Tracker, a panel-based survey of mortgage brokers, tracker mortgages accounted for 51% of broker’s residential mortgage business during the first quarter of the year, up from 45% in the final quarter of 2009.

The proportion of fixed-rate mortgage business declined from 46% to 43%. This was the first time the proportion of fixed-rate business dipped below tracker business since the first quarter of 2009, and was the lowest level of fixed-rate mortgage business since the final quarter of 2008.

John Heron, Paragon Mortgages’ managing director, says: “The proportion of borrowers opting for tracker mortgages has been growing since last summer as borrowers look to take advantage of low interest rates.

“Although there are some good fixed-rate deals available, the average rate on fixed-rate deals is still significantly higher than the Bank of England’s interest rate, and they are becoming less popular with borrowers.

“It also appears that borrowers believe that the Base Rate will remain low for the foreseeable future.”

Of those opting for fixed-rate mortgages, two-year deals are the most popular with more than eight out of 10 (84%) brokers ranking them as first or second in terms of popularity, and more than six out of 10 (63%) classing them as the most popular. Three-year terms were the second most popular with borrowers.

Least popular were rates fixed for the full term, with just 2% of respondents ranking them as most popular and almost half (49%) ranking them as least popular.

Heron adds: “Borrowers opting for fixed-rate deals don’t want to be tied into long-term arrangements. Two-to-three year deals seem to be popular because they offer the borrower immediate security, but also the flexibility to change their mortgage in the medium term.”


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