Fixed-rate mortgage appetite slips

Tuesday, 27 October 2009 02:33

Demand for fixed-rate mortgage is down - with just 34.3 per cent of borrowers in September opting for a fix.

The prospect of interest rates holding at 0.5 per cent at the Bank of England into 2010 and remaining historically low beyond this has encouraged borrowers to look at variable and tracker rate mortgages.

The data from John Charcol show a decline in the number of fixed-rate mortgages sold since the summer.

However, Ray Boulger at John Charcol states fixed-rate deals are starting to become cheaper.

"Most fixed-rates still look too expensive. However, the best fixed and variable rates have got cheaper this month, with some real competition now emerging in some sectors of the market."

He added with weak GDP figures last week, interest rates were likely to hold at low levels into 2011.

"Consequently we have continued to advise the majority of our clients to take a variable rate mortgage, as the differential between fixed and variable rate pricing still means that fixed-rates are discounting a quicker and larger rise in interest rates than looks likely," he said.

Source: John Charcol

Mr Boulger also notes a rise in the number of buyers - against remortgagers - to the highest level this year.

However, the levels of first-time buyers remains low.

"First-time buyer activity as a percentage of total purchases remained subdued in the low double digits at 10.4 per cent, with many potential first-time buyers still either struggling to find a deposit or failing to meet lenders' onerous credit score requirements for high LTV mortgages," Mr Boulger said.

He added the first-time buyer market was now split between those "with parents able and willing to help and those who are not so lucky".

"For those without access to such help often the only options are either saving for many years or one of the government's Homebuy schemes, if they qualify."

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