Borrowers are increasingly moving towards long-term fixed rate deals as two-year fixed rates top 7%, according to Spicerhaart Financial Services.
A study of 1000 mortgage transactions in June found borrowers were increasingly looking for long-term certainty and choosing rates that are fixed for four years or more.
The proportion of borrowers taking out two-year fixed rate mortgages has fallen to just 18% last month, down from 60% in June 2007. The high cost of two-year deals, due to rising rates in swap markets, may be causing borrowers to look at long-term alternatives.
Meanwhile, the popularity of fixed rates of four years or more has risen from just 18% a year ago to 34% last month.
Spicerhaart’s operations director Steve Cox says: “A year ago people were choosing short term products as they were keen to regularly review their mortgage and seek out the best deal.
“However, the changes in the mortgage market and the tightening of lenders' criteria coupled with widespread funding issues have meant that borrowers are keener than ever to lock themselves in for the long term.
“This gives the security of knowing exactly what their monthly repayments will be for the next few years, and avoiding the future uncertainty of coming off a mortgage product, finding a new one and paying a succession of high arrangement fees.”
Spicerhaart also observed a move away from variable rates as borrowers worry that the Bank of England might raise interest rates.
The proportion of borrowers using variable products fell from 28.7% in January 2008 to just 14.7% last month.
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