Mon, 08 Oct 07
Consumers are confident in their financial security and believe that interest rates have now peaked reveals the Spicerhaart Financial Services monthly survey...
As the Bank of England announced the decision to hold the base rate yesterday in the wake of the credit crunch, the percentage of borrowers opting for variable mortgages increased for the third consecutive month.
According to the survey, the proportion of variable mortgages rose to 21% in September, up from 19% in August. Tracker mortgages in particular are becoming increasingly popular and are at their highest percentage this year with 19% of borrowers choosing them; this figure is 13% higher than at the same time last year.
Although fixed rate products continue to dominate, with 79% of borrowers opting for these in September, two year fixed rates have fallen for the second month to 48%.
Borrowing ‘relatively stable’
Steve Cox, Operations Director of Spicerhaart Financial Services, comments: The further decrease in demand for fixed rate products, with consumers turning instead towards variable mortgages, demonstrates that borrowers now believe that interest rates have finally peaked.
The proportion of borrowers opting for longer term fixed rate mortgages, of between 7 to 25 years, remain relatively stable, but fixed two year products have seen the biggest drop, suggesting that borrowers expect an imminent drop in interest rates. Secure in their financial security, people are hedging their bets and opting for variable products rather than locking themselves into the current high rates.
The percentage of first time buyers remained stable at 40% in September, demonstrating that the group are more confident under the backdrop of stabilising house prices and are looking to buy now before prices start to go up again.
Credit crunch impact
The survey also shows a drop in non-conforming mortgages as consumers react to the increased rates now being offered by lenders. Non conforming lending fell by 41%, from 13.1% in August to 7.7% in September, the lowest rate in the last six months. The proportion of non conforming mortgages had previously increased steadily from 10% in April 2007.
Steve Cox comments: The drop in non conforming lending witnessed last month is a natural reaction from consumers as lenders reprice their products, and alter their lending criteria in the wake of the credit crunch. The mortgage market is in a state of flux and consumers coming to the end of their fixed rate mortgages should seek advice sooner rather than later to ensure they secure the best deal.
Back to: News Index