Fixed rate mortgage deals are becoming more and more popular as eight in ten mortgage shoppers are considering the option.
This month’s Experian Credit Barometer, out yesterday (June 20), showed May saw 81 per cent of searches directed at fixed rates, compared with 72 per cent in March and 77 per cent in April.
In comparison, interest for variable repayment rates slowed with only 10 per cent searching for a tracker and 9 per cent for a variable mortgage in the month.
Last year, The Bank of England raised interest rates for the first time in 10 years while governor Mark Carney has previously said interest rates were likely to rise twice more over the next three years.
The possibility of rate rises could mean homeowners increasingly value the stability that longer term fixed rate mortgages provide.
The Bank yesterday (June 20) announced it was holding the base rate at 0.75 per cent, which could encourage more savers to lock in the low rates while they can.
Amir Goshtai, managing director of Experian Marketplace & Affinity, said: “People want certainty when it comes to their finances, especially in times of such economic uncertainty.
“Rising popularity in fixed term mortgages and high searches for loans for debt consolidation tell us borrowers are looking for low, fixed monthly payments to effectively manage their outgoings and keep control of their finances.
“Interest rates for mortgages and loans are relatively low so now is a good time for borrowers to shop around and seriously consider locking-in their monthly repayments.”
It emerged in February that the number of fixed rate residential mortgages available has reached a 12-year high, as 5,214 fixed rates were available on the market compared with 4,570 in the previous year.
Daniel White director of White Financial Services said two-year rates have always been a popular choice because they provide “the flexibility of allowing a client to review over a shorter term”.
However, he added it is “the longer term security in a period of uncertainty” that is pushing more mortgage shoppers towards longer term fixed rates.
Jonathan Harris of mortgage broker Anderson Harris, said five-year deals were proving particularly popular at the moment.
He said: “The attraction is they give protection from potential rises for the medium term, without locking the borrower in for too long.”
Providers have also increasingly been introducing 10 year plans in order to meet growing demand for this option.
Research from consumer champion Which out earlier this year showed the number of providers offering such a mortgage had doubled in the year to January, to 14 providers.
For example, Santander was the latest lender to add a long-term fixed rate mortgage to its range with the launch of a ten-year deal in May this year.
By Eveline Vouillemin
Source: FT Adviser