Consumers switch to fixed

Consumers 'switch to fixed'

18 December, 2006

Hamptons has revealed an increase in the number of borrowers opting for fixed rate mortgage deals, as interest rates have increased.

Hampton’s November Best Buy Mortgage Tracker showed the number of people choosing two-year fixed mortgage deals increased from 42.98% of all Hamptons mortgage business in October 2006 to 53.68% in November, a rise of nearly 11% (10.7%).

Longer term fixed deals also saw a rise of nearly 6% (5.68%) from 2.41% in October to 8.09% in November. Two-year variable deals, on the other hand, saw a fall of nearly 13% (12.75%), 36.18% in October to 23.43% in November. Longer term variable deals also saw a decrease.

The popularity of fixed rate deals comes as the Bank of England base rate rose to 5.00% at the beginning of November and, as a result, variable rates increased to reflect this. Moneyfacts reported rate increases of nearly 0.3% for both two-year and five-year “best buy” discounted variable mortgage deals and the average Standard Variable Rate (SVR) rate for the top 10 lenders increased to 6.84% from 6.68% in October.

Meanwhile, Hamptons data also showed a decline in home purchase (Oct-46.08% to Nov-37.14%) and buy-to-let cases (Oct-18.03% to Nov-15.71%), whilst home remortgage cases increased by 7.82% (Oct-26.47% to Nov-34.29%).

Jonathan Cornell, technical director at Hamptons International Mortgages, commented: “A Bank of England base rate rise had been anticipated for several months and many lenders had already begun to factor this into their fixed mortgage deals before November. Because of this many customers last month opted for variable deals as these were better value than many fixed rates.

“However, with the base rate now at 5.00%, variable deals are now at the same level as fixed deals. Our data seems to suggest that customers are opting to play safe and fix their mortgage to protect themselves against any future base rate increases.”