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Fixed rate mortgages come to the fore

Fixed rate mortgages come to the fore

Category: Mortgages

Updated: 11/08/2010
First Published: 11/08/2010

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 It is now over 6 months old so the content may be out of date.

Fixed rate mortgage deals appear be finding favour once again, after it was revealed that almost half of new mortgage borrowers opted to fix their rate in June.

According to the Council of Mortgage Lenders (CML), fixed rate mortgage deals had been proving unpopular in 2010 compared with previous years.

However, 48% of new borrowers took out a fixed rate mortgage deal in June, the highest proportion seen in 2010 so far.

With the Bank of England base rate at a record low of 0.5%, and the chances of it rising seemingly slim, borrowers have preferred to remain on their lender's standard variable rate when their fixed rate mortgage deal came to end, or take out a tracker deal.

However, with the cost of fixed rate mortgage deals falling, opting to take such a deal now is becoming ever more appealing.

Recent research from Moneyfacts.co.uk showed that the price of fixed rate mortgage deals had fallen to a seven year low.

A two year fixed rate mortgage deal at 2.99% is currently available from Yorkshire Building Society, while ING Direct has a deal priced at 3.09%.

Over the longer term, HSBC is currently offering a five year fixed rate mortgage deal at 3.95%.

The CML also revealed that house purchase lending had increased by 20% over the last three months, while the number of remortgage loans agreed was 2% higher than in the first quarter of the year.

"For the time being, the effects of Government spending cuts have yet to make an impact on mortgage demand, and activity continues on its upward trajectory," said CML economist Paul Samter.

"But we still expect house purchase activity to be muted in the coming months. Both consumer demand and lending capacity remain distinctly difficult to call, especially in the light of the Government's austerity measures and their possible impact."

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