Fixed rates product of choice, says CML
Announcing the results of its first Regulated Mortgage Survey (RMS), the CML revealed fixed rate loans accounted for 76 per cent of all lending during the fourth quarter (Q4) of 2005, an 8 per cent increase from quarter three’s total of 68 per cent.
Michael Coogan, director-general of the CML, said the popularity of fixed rate deals showed consumers were becoming more financially astute. He said: “The combination of interest rate rises in recent years with modest increases in arrears and possessions have alerted people to the long-term security of fixed rate products. This is encouraging as it shows people are planning ahead to avoid financial difficulty should rates rise in the future.”
The research also revealed more affordable mortgage rates had been a catalyst for first-time buyers to return to the market, with this sector accounting for 108,500 house purchase loans during Q4 of 2005. However, Coogan suggested these higher than estimated results may be as a result of changing data sources, with the new RMS system providing ‘more robust data’ than the previous Survey of Mortgage Lenders (SML) information used by the CML.
Research further revealed the median age of a first-time buyer to be 29, with the average loan size standing at £103,000 during Q4, up from £98,000 in Q2.
Kim Barrett, proprietor at KS Barrett & Associates, confirmed fixed rate loans would be popular among buyers who had got financial advice, but cast doubts on the return of the first-time buyer. He said: “Fixed rates provide a sensible planning process and most advisers will discuss fixed rate deals with their clients. But with regards to first-time buyers I have not seen any evidence of their return. In fact I would say they are struggling to enter the market.”