Homeowners look to fix as enthusiasm for SVRs wanes
Britons appear confident that the Bank of England’s base rate has bottomed out at 0.5% and are therefore favouring fixed-rate mortgage deals.
According to Abbey’s mortgage index, last month 60% of homeowners preferred the idea of a fixed-rate home loan, on the basis that it could offer protection from future rate rises.
The figures compares with 52% favouring a fixed-rate deal in January.
Twenty-one per cent of homeowners keen to fix said they would opt for a two-year deal although the number of borrowers opting for 10 year-fixed rate has doubled since January.
The survey also shows demand for standard variable rate (SVR) loans falling from 28% in January to 15% in May, despite some lenders having provided highly attractive SVRs since the Bank of England began its assault on the base rate last year.
Abbey Mortgages director, Nici Audhlam-Gardiner, comments: “The last few months of 2008 saw a huge focus on the Bank of England’s Monetary Policy Committee as rates shot downwards each month.”
She adds: “As mortgage borrowers realise that variable deals will no longer fall further, it seems that many are now trying to work out when rates will rise again and how long to fix their rate for.”
According to the research, tracker loans are finally waning in popularity after a six month run of approval.
With the base rate at an all time low, trackers have been offering rock bottom deals but lenders’ margins have been creeping up and borrowers need to be confident they can afford higher repayments when interest rates inevitably begin to rise.