November 23, 2009
Borrowers Still Out Of Love With Fixed Rate Mortgages
As rates stay low, and are likely to stay low for the foreseeable future, people are opting for tracker rates and variable rates instead of the old, reliable fixed rate.
The popularity of fixed rate mortgages continued to rapidly decline in October, according to John Charcol, with their share of the market falling to just over a quarter, at 26.3%. This is their smallest market share since November 2008, and is a dramatic decline from their recent peak market share of 83.1% only four months ago in June.
Drew Wotherspoon of John Charcol says: “With the outlook for interest rates little changed over the last month an even higher proportion of borrowers chose a variable rate mortgage, in most cases a tracker."
Recently, Mervyn King, the governor of the Bank of England, admitted that it was unlikely that monetary policy would be able to affect any inflation changes in the coming months – essentially the Bank will not be raising the base rate and will be letting the market take its own course in the medium term.
So can we expect months of low rates? We just can't be sure, but John Charcol says that even if long-term fixed rates don’t get much cheaper, there seems a good prospect that borrowers on a variable rate will be able to benefit from rates more than 2% lower for the time being and then switch to a similarly priced fixed rate later.
To predict the future is foolhardy, but mortgage experts have a good idea how the financial markets will be acting over the coming months. That's why you always need to talk to a financial professional when it comes to big financial decisions like a mortgage – they might not know the future for sure, but they have a good idea of what is to come and will use that knowledge to help pick you the best mortgage possible.
SOURCE: BoE, 11/11/09, John Charcol, 17/11/09
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