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Borrowers banking on variable rate mortgages

Borrowers banking on variable rate mortgages

Category: Mortgages

Updated: 27/04/2010
First Published: 27/04/2010

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 It is now over 6 months old so the content may be out of date.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 continued to be the mortgage of choice for borrowers during March, new figures have revealed.

More than eight in ten (84%) borrowers took a variable rate mortgage last month, according to the latest John Charcol Mortgage Index, the highest figure seen since October 2008.

Drew Wotherspoon, director of marketing at the broker, said that at first glance, the difference between variable and fixed rates was nothing short of monumental.

He added that during March, the difference between comparable variable and five year fixed rates was around 2.5%, so the right advice for most borrowers had been to float and not fix.

"When you look below the surface, with the large premium that borrowers have to pay for a fixed rate mortgage and the expected future movement of bank rate, it is little surprise that variable mortgages dominate their fixed counterparts," he added.

"Interestingly, as we pass the half way point in April, with the differential between variable and fixed rates decreasing, our own statistics point to more fixed rates being taken out than a month ago."

Meanwhile, the number of mortgages arranged for first time buyers dropped to their lowest level for a year.

The index revealed that just 7% of mortgages arranged during March were for first time buyers, compared with almost 22% a year earlier.

"The prolonged issues faced by first time buyers for a decade now are well publicized, but the economic downturn had provided a small glimmer of hope for the army of would be homeowners," said Mr Wotherspoon.

"As house prices continue to rise, it seems that first timers are again disappearing from the market.

"With the stamp duty move announced in the budget perhaps this number may increase gradually, but it was hardly the panacea for a bruised and battered brigade."

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