Homeowners shy away from fixed rates

Category: Mortgages
Date: 7/20/2010

With the Bank of England's base rate likely to remain at its record low of 0.5% for some time to come, homeowners are steering clear of fixed rate mortgages.

Some three quarters of homeowners choosing a mortgage opted for a variable rate product in June, according to John Charcol.

"There is little change in the product preference of most borrowers, with the cost of fixed rates and the chance that rates will remain low for some time to come, putting consumers off fixing," said Drew Wotherspoon, director of marketing at charcol.co.uk.

According to the figures, six out of 10 mortgages taken out in June 2010 were for purchases, suggesting that homeowners coming to the end of their terms are looking to remain on low standard variable rates offered by their providers.

"For those borrowers who are in a position to remortgage it would seem that they are waiting for some movement in bank rate, or at least some more definitive information as to when it will move.

"Whilst this strategy is understandable, increasing numbers of borrowers could be considerably better off if they moved their home loan now," added Mr. Wotherspoon

The number of first time buyers securing a mortgage also continues to be low, with figures showing that new entrants to the mortgage market accounted for a mere 5.4% of buyers last month.

"This is the lowest level it has been since December 2008 and suggests that a combination of strict lender criteria and inherent nervousness in the market continues to severely affect the amount of new entrants.

"This group desperately needs more competition in the 90% LTV market."

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They include Yorkshire BS's new two year fixed rate deal that offers a competitive rate of 2.89%.

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