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Variable rate mortgages won’t move over

Variable rate mortgages won’t move over

Category: Mortgages

Updated: 04/04/2011
First Published: 25/08/2010

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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 It is now over 6 months old so the content may be out of date.

Variable rate mortgages remain the mortgage borrower's product of choice, new research has revealed.

The falling cost of fixed rate mortgages and forecasts of significant interest rate rises in the next few years have led many experts to suggest fixed rate mortgages might be the best way forward for mortgage borrowers.

However, the latest data from John Charcol showed that three quarters of borrowers opted for a variable rate mortgage in July, and just a quarter chose their fixed rate counterparts.

It seems that borrowers are still attracted to some of the low variable rate mortgage rates currently available in the market.

A variable rate mortgage as low as 2.19% for term is currently on offer from HSBC to borrowers with a 40% deposit, while ING Direct and first direct have variable rate deals priced at 2.65% and 2.79% for term respectively for those with a 25% deposit.

"Even with the improvement in pricing of fixed rates recently, borrowers are showing little signs that they believe it is time to take long term security," said Drew Wotherspoon, director of marketing at Charcol.co.uk.

"Despite the best attempts of some market commentators to scare the entirety of UK borrowers by suggesting we could have 8% interest rates soon, variable rates are still, in our opinion, the product of choice.

"For the record, we would be surprised if bank rate was anywhere near that level by the end of 2015."#

The research also found that first time buyers once again seem willing to dip their toe into the property market.

Many potential first time buyers put their plans on hold to await the outcome of the election and subsequent emergency Budget.

However, an 80% rise in the number of first time buyers was reported in July, the highest level seen since February this year.

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