Only a quarter of house buyers opt for fixed rate

The popularity of fixed rate mortgages continued to rapidly decline in October, according to the latest John Charcol Index, which tracks the percentage split between Fixed rates, Capped rates and Tracker or Discount rates; between Purchases, remortgages and product transfers; and of first time buyers compared to all Purchasers.

The report shows that the share of the market represented by fixed rate mortgages fell to just over a quarter, at 26.3%. According to John Charcol, this is fixed rate mortgages smallest market share since November 2008, and is a dramatic decline from their recent peak market share of 83.1% only 4 months ago in June.

Drew Wotherspoon of John Charcol said:

“The roller coaster movement in product choice reflects the rapid change in mortgage pricing and interest rate sentiment over the last year. 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. The Bank of England’s announcement this month of an extnsion of the Quantitative Easing programme by a further £25bn is another indication that Bank Rate in unlikely to rise in the next few months. Even if longer term fixed rates don’t get much cheaper than those currently available at just under 5%, 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.”

“There was a further increase, albeit small, in the proportion of purchases last month, to 58.5%, the largest percentage since we started keeping records. First Time Buyer (FTB) activity as a percentage of total purchases showed a marked increase to 15.3%, up from 10.4% in September. Although many potential FTBs are still shut out of the market because of the lack of an adequate deposit or failing to meet lenders’ onerous credit score requirements for high LTV mortgages, several lenders have improved their pricing and availability of mortgages to 85% and 90% over the last month and so there are some encouraging signs for these would be FTBs.”

It always pays to shop around to make sure you’re getting the best deal. If you would like to speak to a broker who can help you choose a mortgage to suit your needs, visit http://www.totallymoney.com/mortgages.

(Photo by StevenM_61.)