242014Nov

Fixed Rate Mortgages Become More Popular

With the cost of fixed rate mortgages tumbling, homeowners are being encouraged to switch away from standard variable rate mortgages. Lenders are keen to retain their customers if and when the Bank of England increases base rates.

There has been much speculation in recent months about the timing of an increase in the base interest rate which has remained at a level of 0.5% since 2008. Although the suggested date for any rise has been put back until after the election next year, lenders are worried that they will lose many customers due to re-mortgaging when standard variable rates move upwards because they are normally linked to the base rate.

Because a fixed rate mortgage has usually been more expensive than one with a variable rate, the Council of Mortgage Lenders has revealed that as many as two thirds of mortgages are currently on the standard variable rate. With no early redemption charges on them, the clients can switch Provider at a minimal cost to themselves.

In order to protect their mortgage books, Providers have been reducing the cost of their fixed rate mortgage offerings. The average rate has fallen by 0.25% in the last two months and now stands at a level of 3.27%. The number of fixed rate deals available has also risen in anticipation that homeowners will re-mortgage with their current Lender when they elect to do so.

A major re-mortgaging trend is likely when base rates increase as it will hit home to many people that the cost of their mortgage could become unaffordable without the security of a fixed rate.

If you would like to assess whether it is now appropriate to switch your mortgage to a fixed rate, an impartial mortgage adviser like Bower Mortgages can inform you about the options which are available from the whole of the market.


Source:

Money Facts 29/10/14

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