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Borrowers steer clear of fixed rates

Borrowers steer clear of fixed rates

Category: Mortgages

Updated: 21/12/2009
First Published: 21/12/2009

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The popularity of fixed rate mortgages continued to decline in November, with only just over a fifth of borrowers now choosing to fix their mortgage repayments.

Representing the smallest market share enjoyed by fixed rates since October last year, John Charcol said their popularity had nosedived since reaching a peak market share of 83% in June.

Most borrowers opting for a fixed rate took a two year fix, with nearly all the rest choosing a five year deal.

Recent research from Moneyfacts has suggested competition in the mortgage market appeared to be returning and is a view shared by Ray Boulger of John Charcol.

"The cost of both fixed and variable rates fell in November as a result of some increased competition from lenders," he said.

"Although fixed rates fell a little further than trackers, on most interest rate forecasts a good tracker will cost less than a comparable fixed rate over at least the next two to three years.

"Indeed only last week Roger Bootle, managing director of Capital Economics, forecast that bank rate would not exceed 1% in the next five years.

"However, in this uncertain world, things can change quickly and so we have advised many of our clients to take a lifetime tracker rate with low and only short term early repayment charges, so that they are in a position to switch quickly to a fixed rate if the interest rate outlook changes."

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