Brits sit tight on mortgages as rates rise

Tuesday, 14 November 2006 12:00

The number of people remortgaging in the UK has dropped to its lowest level for five years as interest rates climb.

New figures from the Council of Mortgage Lenders (CML) reveal remortgaging accounted for just 30 per cent of the mortgage market in September.

This is the lowest figure since August 2001, which was also the last time interest rates were at five per cent.

"The downward trends in remortgaging illustrate how lenders are reacting to competitive conditions, and offering attractive retention products and policies to their customers," said CML director general Michael Coogan.

"Today's figures show that slowly but surely the market is cooling as we approach the end of the year in an environment of higher interest rates."

Additionally, as the average cost of fixed-rate mortgages climbs above five per cent, the proportion of people taking out fixed-rate deals has also fallen.

In September the average interest rate charged on a fixed-rate mortgage deal was 5.24 per cent, up from 5.18 per cent in August.

Fixed-rate mortgages still made up 59 per cent of the market in September, unchanged from August, but over a three month period they made up 60 per cent of all loans. This is ten points lower than over the summer.

But this increase in costs is not just hitting people remortgaging.

In September just 31,100 mortgages were lent to first-time buyers - 4,100 fewer than in August and 3,600 fewer than in the same month last year.

Loans for people moving home also fell, from 66,100 loans in August to 56,700 in September.

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