Fixed Rates In Vouge

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More and more people are looking to fix in their mortgage rates now before the economy drives up the current low fixed mortgage rates.

The Council of Mortgage Lenders has found that 69% of borrowers took out a fixed rate mortgage in April, with an average rate of 4.83% – it says it has not seen this many people fixing in since June 2008. More and more advisers are urging their clients to think of the long-term and ignore the short-term gains a tracker or variable rate will give them right now.

While CML figures found that the number and value of house purchase loans increased by 16% from March to 35,600 loans worth £4.5bn in April, year-on-year the value of loans is down 40% and the number of loans down 28%.

Bob Pannell, head of research for the CML, says: “With the interest rate cycle now at its floor, an increasing proportion of borrowers are taking out fixed rates, including for longer term periods of five-10 years. With expectations for rates to remain low in the near future, shorter term fixed-rate deals are less appealing than attractively priced variable rate deals. There are tentative signs of house purchase lending stabilising, but we need to see considerably higher transaction levels to underpin house prices."

You might read this and scoff at the idea of locking into a 4.83% mortgage for five years while your standard variable rate languishes as low as 2.5%, or while your tracker is tracking below the base rate. While it's great that people are paying so little, they must understand that if and when rates rise, they will have quite the shock.

So talk to a mortgage adviser about avoiding a payment shock and locking in now, while the fixed rates are going good.

SOURCE: CML, 11/06/09

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