Consumers share Carney’s low rate optimism

Robyn Hall

September 19, 2013

This trend coincided with Carney’s forward guidance announcement which stated interest rates would remain at 0.5% until unemployment fell below 7% which is widely anticipated to be in three years.

Brian Murphy, head of lending at Mortgage Advice Bureau, said: “These figures clearly show how influential the Bank of England can be on borrower sentiment.

“Analysts may question whether interest rates can remain on hold until 2016 if the economy builds on recent progress and continues to emerge from the gloom.

“But the house buying public are clearly open to reassurance from the Bank with more people willing to trade in the security of fixes this month for the benefit of lower rates.”

This pushed the popularity of variable rates for remortgages to its highest point in over a year since 23.3% of consumers made the same choice back in July 2012.

Using data from more than 500 brokers and 800 estate agents the National Mortgage Index also showed that while more than nine in 10 homebuyers continued to favour fixed deals in August, 91.2%, this was down by 1% from July and the lowest since November 2012 when 89.7% applied for fixed rates.

However homebuyers in London defied the trend towards fixed rates with 91.8% opting to fix in August: the first time this figure has passed the 90% marker during 2013.

Just 82.7% of buyers in the capital chose fixed rates in July and just 71.5% back in August 2012.

The general shift towards variable deals was fuelled by the first increase in 2 and 3-year fixed rates for over a year.

The average 2-year rate rose for the first time since June 2012 to 3.69% having stood at 3.63% in July 2013.

Average 3-year rates also rose for the first time since July 2012 up from 4.02% in July 2013 to 4.06%.

In contrast 2-year trackers continued to fall in August as they have done every month this year with an eighth consecutive drop to 3.14% in August from 3.28% in July.

Average 5-year fixed rates also fell to a new low of 3.83%: the lowest seen in over six years.

Competition between lenders continued to push product numbers up with 11,043 available on average during August.

This was 781 (8%) more than in July, the biggest monthly increase since April 2011, and means the range of products on offer has grown by 350% in the last four years from 3,158 in August 2009.

Murphy: “With 5-year fixed rates falling by 0.05% and 2-year fixed rates up by 0.06% there are still plenty of reasons to consider locking down for longer.

“With Londoners bucking the trend this month and fixing in greater numbers it is clear that regional variations in market conditions call for careful consideration from borrowers to weigh up all their options.

“Despite August being the peak month for summer holidays activity was still considerably stronger than the same time last year.

“In a fast moving market where conditions are improving every month a seasonal break is no reason to delay a house purchase or sale.”

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