Preference for longer-term mortgage products overtakes two-year deals for the first time
The preference for longer-term mortgage products has overtaken 2-year deals for the first time, Paragon’s Financial Adviser Confidence Tracking Index report has found.
Some 48% of residential and buy-to-let applications were at 5-years or more in Q4 2017. That represents an increase of 7% on Q3 2017 and 15% on the same period 12 months earlier, as the preference for longer-term fixed products continues to grow in popularity.
Conversely, 2-year terms, which have been the overwhelming preference over the last five years, made up 40% of fixed and tracker cases in Q4 2017. This was down 7% on the previous quarter and 14% on its peak, achieved in Q3 2013 and Q3 2014.
John Heron, managing director of mortgages at Paragon, said: “The results of our latest intermediary research highlight the overwhelming preference that the market has for fixed rate products and increasingly for longer term fixed rate products.
“Much of this is driven by the understandable requirement that landlords have for payment stability into the future against an uncertain economic backdrop.”
The overall preference for fixed rate mortgage products hit another all-time high, the second in successive quarters and third in 12 months, up 2% to 91% of all cases. The preference for tracker products reached another all-time low in Q4 2017, down to 7% from 9% in Q3.
In buy-to-let, remortgaging continues to drive the market, with the proportion of buy-to-let remortgages back up to 52% in Q4 2017. This continues a steep rise in remortgaging, up from 28% following the global financial crisis.
Despite a marginal decline in Q4 2017, the principal reason for obtaining a buy-to-let remortgage is still for a better interest rate, making up 55% of all cases.
Some 35% of landlords, the lowest figure recorded, used a buy-to-let remortgage to raise capital in the same period, as the disparity widens between the two reasons that were level at 45% just two years ago.