Derin Clark

Derin Clark

Online Reporter
Published: 30/10/2019

Over 95% of mortgage borrowers have chosen fixed rate mortgages in recent months, with around half of these opting to fix their mortgage repayments in a five-year deal, figures from the Nationwide House Price Index reveal.

The report also reveals that annual house price growth has remained subdued at 0.4%, which is just a 0.2% rise month-on-month, after taking into account seasonal factors. This is the 11th consecutive month that annual house price growth has remained below 1%, with the average house price only rising by around £800 over the last 12 months.

Commenting on the figures, Robert Gardner, chief economist at Nationwide, said: “Indicators of UK economic activity have been fairly volatile in recent quarters, but the underlying pace of growth appears to have slowed as a result of weaker global growth and an intensifying of Brexit uncertainty. To date, the slowdown has centred on business investment, while household spending has been more resilient.

“The underlying pace of housing market activity has remained broadly stable, with the number of mortgages approved for house purchase continuing within the fairly narrow range prevailing over the past two years.

“Solid labour market conditions and low borrowing costs appear to be offsetting the drag from the uncertain economic outlook. The question is whether this pattern will continue.

“There were tentative signs of a softening in the jobs market in the three months to August, as employment fell, unemployment rose, and wage growth slowed a little. If this trend continues it would be a significant concern, as the labour market has been the key factor underpinning the resilience of the household sector in recent years.

“However, monthly data is often volatile and the unemployment rate remains close to 40 year lows and real earnings growth (i.e. after taking account of inflation) is close to levels prevailing before the financial crisis.

“If Brexit uncertainty lifts in the months ahead, hiring is likely to recover, although there may be some upward pressure on mortgage rates as investors once again contemplate the potential for UK rate increases in the years ahead. However, in the near term such increases are likely to be capped by trends in global financial markets. Weak global economic prospects continue to exert downward pressure on long-term interest rates around the world – including the UK.”

Five year fixed rate mortgages

We reported earlier in the week that over the past 12 months there has been a sharp drop in five-year mortgage rates. Research from Moneyfacts.co.uk shows that the average five-year mortgage rate has fallen by 0.19% in the last 12 months, while the average two-year mortgage rate has fallen by just 0.08%. While two-year fixed mortgage rates continue to offer lower rates than five-year rates, borrowers concerned by the economic uncertainty, and who are able to afford the five-year repayment rates, may prefer the security of fixing into a long-term deal.

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