Long-term fixes on the increase
A survey from the lender has revealed the number of five-year fixed rate loans, comprising of 26 per cent of all its mortgages in May, have increased to a record level.
Although the Bank of England has kept interest rates at 4.5 per cent for 10 months, fixed rate mortgages have been going up in price as many lenders have factored in the anticpated Base Rate increase when pricing fixed rate products. In contrast, tracker mortgages are now more competitive than fixed rate deals, but the findings from Mortgage Direct showed that the number of borrowers opting for tracker mortgages fell from 14 per cent to 8 per cent in May.
Peter Gladdy, director of Mortgages Direct, said growing concern among consumers showed many were also concerned about continued rate hikes. He said: “With the increasing speculation that interest rates will rise in the imminent future, borrowers are becoming a lot more cautious. They are not prepared to take the chance that rates will only increase by the already widely speculated amount of a quarter of a per cent, but fear further hikes in forthcoming years.”
Gladdy added: “With interest rates in historical terms at inherently modest levels, borrowers are showing little confidence that the rates will remain at this level. Despite the competitive tracker mortgage deals currently on offer, borrowers are worried that repayments with a tracker could rise beyond their budget.”
Jonathan Cornell, technical director at Hamptons International Mortgages, said: “The market is seeing a reasonable swing towards longer-term fixed rate mortgages, but I do not think borrowers are panicking. I think more people are considering whether they can afford to pay out more if rates rise, and if not, they are choosing fixed rate deals.”