Interest in fixed rate deals starts to wane
Recent reports have suggested that consumer interest in fixed rate mortgage deals is now starting to fall, as consumers think that interest rates are unlikely to go much higher and therefore do not want to be tied into a fixed rate for two or three years in case interest rates begin to fall again.
Although it is widely expected that there will be a further rate rise of 0.25% this year, which would take the rate to 6%, fixed rates are already set higher because of the security feature and this means that those taking out these rates would end up paying more interest for the specified period if the rates stabilize or fall.
One mortgage expert stated: 'With the market having fully factored in not only this rise, but also another one to 6%, Swap rates are now at their highest since 2000 and most fixed rates look expensive compared to discounts and trackers, unless bank rate goes beyond 6%. While fixed rates have always been popular due to the security they provide, we are now seeing a fall in the proportion of borrowers choosing a fixed rate as borrowers decide that rates are close to their peak, thus reducing the value of paying a premium rate for interest rate protection. '
He added: 'Currently, the best two-year tracker mortgages are around 0.35% cheaper than the best two-year fixed rates, even after the effect of the latest rise. Thus a fixed-rate mortgage will only be cheaper if bank rate rises rapidly to at least 6.25% and stays there, or goes higher, for some time.'
There is already a great deal of concern over consumers that are due to come off their fixed rate deals this year, as this will mean that their repayments will rocket. Those on interest only fixed rate mortgages could see their repayments soar by around 70% once the fixed rate period ends, and this could push many into financial disaster if they cannot keep up with the higher repayments.
11th July 2007
Recent Mortgage News:
- Choosing The Right Mortgage
The market is flooded with different types of mortgages, but how do you know which one is right for you? The decision has to be yours, whether you take advice from an Independent Financial Advisor or do your own research.
- Don’t Forget The Extra Hidden Costs Of Getting A UK Mortgage
For most of us, buying a new home is both one of the most exciting and stressful times of our lives. It goes without saying then that this is not a particularly good time to find out that you may be facing a bill of thousands of pounds in extra hidden costs for getting the mortgage to buy the UK property.
- Can You Rely On Your Family To Help You Buy Your First Home?
At no time in its history has the UK housing market since such a marked increase in the average value of its housing than in the last 20 years. Today, regardless of whether you come from the North-east or South-east, more and more young Britons are having to stay at home much longer and also to look more ingenious ways to try and raise the large deposits they’ll need in order to help them purchase that first home. The big question is, can you rely on your family to help you buy your first home?