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According to research by Abbey, home purchasers are increasingly opting for fixed-rate mortgages. This increase comes, despite the last Bank of England base rate cut to 5.25 per cent in January 2008.
From the Abbey survey, 35 per cent said they would opt for a fixed rate deal following continued uncertainty caused by the ‘credit crunch’ and the gloomy outlook for the British economy. This is an increase of 13 per cent on the previous month of February 2008. The present economic climate is encouraging more borrowers to seek the security of knowing how much their future monthly repayments will cost, particularly with the cost of living rising at a faster pace than their pay.
Consumers are coming under considerable pressure with a sustained assault on their disposable incomes. Rises in mortgage costs for those not shielded by fixed-rates together with significant rises in the costs of utilities, council tax, fuel for transport as well as food, and have severely eaten into discretionary incomes.
Nici Audhicm-Gardiner, director of Abbey mortgages said, “We expect that economic uncertainty is contributing to this trend as people try to take control over their outgoings.”
Data from the Council of Mortgage Lenders released last month, showed that 73 per cent of purchasers took out fixed-rate mortgages in 2007.
With some lenders not automatically reducing their rates on more flexible mortgages, in line with the Bank of England base rate cuts, this is enhancing the attraction of fixed-rate mortgages. Figures from Abbey states five year fixed-rate deals is the most popular amongst borrowers, an increase of 7 per cent from last month.
The Government is also encouraging more lenders to offer longer term fixed-rate deals to consumers up to 25 years, thus promoting greater stability in the mortgage market.
Editor: Simon Weston-www.myfirsthomeltd.co.uk
Blog: www.myfirsthomeblog.com
Email: simon.weston@myfirsthomeltd.com
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