Moneyfacts: Consumers seeking stability with fixed rates

Jake Carter

September 22, 2021

fixed rates

An estimated 80% of those searching for a mortgage in August were looking for a fixed rate product, according to the latest risk, availability and demand data from Moneyfacts Residential Mortgage Analyser.

Moneyfacts’ said this indicates that during times of economic uncertainty, borrowers prefer fixed rate mortgages, perhaps due to the ability to budget and the protection from future interest rate volatility.

The data also found that those whose 5-year fixed rate mortgages from 2016 are now maturing and who are searching for a similar product now, will find that at 2.63%, the average overall fixed rate, is 0.41% less than when they secured their existing deal.

Similarly, the average rate for 2-year fixed mortgages, at 2.38%, is 0.08% below the equivalent rate in September 2019, so those coming off a 2-year fixed rate may also be able to find a more competitive deal.

Availability of 10-year fixed rate mortgages remained relatively stable, with 128 deals. The level of choice was 31 less than in September 2019, but when compared to 2016 there was one option more than was on offer five years ago.

Darren Cook, head of analyser products at Moneyfacts, said: “The risk, availability and demand data from Moneyfacts Residential Mortgage Analyser evidences that mortgage consumers appear to appreciate the effect the Bank of England base rate and future inflation rates may have on interest rates as a whole and what type of mortgage they are looking at applying for.

“Our latest research shows that over eight in 10 (81.04%) consumers looking for a new mortgage during August, searched for the availability of a fixed rate mortgage.

“That leaves less than 20% of consumers searching for a variable rate mortgages, which may indicate that a vast majority of potential new mortgage holders may be more risk-averse in the current economic climate.

“Currently, just under nine in 10 (87%) of all fixed rate mortgages available on the market are either 2- or 5-year initial rate deals, so appears that mortgage providers are recognising consumer sentiments in these two sectors, as analysis shows that 36.18% of consumers are looking for a 2-year fixed rate mortgage and 28.40% are searching for a 5-year deal.

“Longer term financial stability may also be in the forefront of consumers’ minds as the economy moves forwards, with 8.93% of demand taken up by those looking for a 10-year fixed rate mortgage.”

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