Fixed rate mortgages have become increasingly popular with the number of mortgages taken out at fixe...
Fixed rate mortgages have become increasingly popular with the number of mortgages taken out at fixed rate rising to 50% in May, the Council of Mortgage Lenders says.
According to figures released today by the CML, this is the highest level since the end of 1998.
It is also an increase of 10% compared to April.
Reflecting borrowers' demand for competitive rates, fixed rate mortgages have become the number one choice, the CML says.
This comes as the average new fixed interest rates dropped from 4.52% in April to 4.21% in May.
Meanwhile, gross mortgage lending continues to remain strong, paced by remortgaging accounting for over 50% of all lending last month.
The survey shows that gross advances rose to £21.5bn in May this year, compared to £20.3bn in May 2002.
Of these figures, remortgaging accounted for over 50% of all lending last month compared to only 34% last year.
Loans for house purchase also increased last month compared to April - now representing 41% of all lending.
But it remains significantly lower than the level seen in May 2002, when loans for house purchase accounted for 60% of mortgage business.
Not surprisingly, the survey also shows that the proportion of mortgages taken out by first-time buyers continued to fall to 30% last month compared with 37% a year earlier.
CML director general Michael Coogan says:
"A reduction in the price of short-term fixed-rate mortgages has resulted in a significant increase in the popularity of these products in recent months. This clearly shows the price sensitivity of UK consumers, and that borrowers will opt for fixed-rate products if they are competitive."
"However, the current pricing of short-term fixed rate mortgages is being helped by expectations of interest rate reductions. It is unlikely that the market can deliver long-term fixed-rate mortgage products that are attractive to UK consumers, as the Chancellor of the Exchequer has advocated, without the introduction of significant Government incentives to encourage borrowers to take them out."
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