Variable rate mortgage rollercoaster continues - Mortgages - News - Moneyfacts

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Variable rate mortgage rollercoaster continues

Variable rate mortgage rollercoaster continues

Category: Mortgages

Updated: 27/08/2009
First Published: 27/08/2009

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 It is now over 6 months old so the content may be out of date.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 demand for variable rate mortgages more than doubled last month, reflecting a sea-change in opinion on how long interest rates will remain low.

The recent steep rise in the cost of fixed rate deals has also lessened their popularity, according to the John Charcol Index, with variable mortgages more than doubling their market share in July to 34.7 per cent.

In June, variable rate products accounted for just 17 per cent of mortgage activity.

The latest figures are just the latest chapter in an unpredictable period that began in January 2008, when just 25 per cent of clients opted to choose a fixed rate mortgage.

However, just four months later that percentage had risen markedly, with fixed products accounting for 64 per cent of the market, before crashing to a lowly 14 per cent in October.

In the first six months of this year, consumers looking for home loans increasingly swung back to fixed deals, culminating in a record 84 per cent over the four months to June.

John Charcol said that this upturn eroded their value in insuring against rate increases and, as such, it has started to advise clients to opt for variable products.

A small but noticeable increase in the availability of tracker and discount mortgages with loan-to-values of more than 75 per cent has also helped facilitate the move away from fixed deals.

"We have seen a further dramatic fall in the take up of fixed rate mortgages this month and it looks almost certain that fixed rates will take less than half of the market in August, both by case number of volume," predicted Ray Boulger of John Charcol.

"This reflects the changing views on how long interest rates will stay low and in particular the actions of the Bank of England this month in the major extension of its Quantitative Easing programme."

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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