Fixed rate popularity sees June peak

| July 23, 2009

Last month saw homebuyers and remortgagers opt for fixed-rate loans as never before.

According to mortgage broker, John Charcol (JC), the proportion of customers choosing fixed-rate deals rose to a record 83.1% in June and the firm’s mortgage activity monitor also showed the average take-up at 81.2% over the past four months.

However, the broker believes the figures could have peaked because of a “sharp increase” in fixed rates in recent weeks, making tracker deals very attractive.

JC spokesman, Ray Boulger, expects fixed rates to continue to be the choice of the majority for some time, but says his firm is recommending trackers to more clients in July, with the focus on products with low or no early repayment charges (ERCs).

He explains: “The reason the size of the ERC is important, unless the mortgage offers a droplock option, is that many clients will want to consider switching to a fix when the time is right for them.”

In recent months mortgage experts have been advocating fixed-rate deals on the grounds that any change in the bombed out 0.5% base rate will be upward.

However, a report published earlier this week by Ernst & Young ITEM Club predicts that interest rates will remain low for the next 18 months.

The Club makes the forecast against the backdrop of a 4.5% contraction of the UK economy in 2009, which would mark the biggest single-year decline since 1945.

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