Consumers prefer fixed rate deals to cheaper tracker mortgages

According to the results of a recent survey the vast majority of consumers in the UK would prefer the safety net of a more expensive fixed rate mortgage deal over the uncertainty of a cheaper base rate tracker mortgage, despite the predictions that interest rates may fall in months to come.

The research was carried out by the Abbey, and the results indicated that around four out of five consumers – equating to 80% of consumers – would opt for a higher rate fixed rate mortgage over a cheaper base tracker mortgage if they had to remortgage. The majority of those stating that they would choose the fixed rate deal also stated that they would want to fix the interest rate for at least two years.

Of the consumers that were polled as part of the research 16% stated that they would opt for a ten year fixed rate mortgage fixed at a rate of 6.24%, but only 7% said that they would choose a two year base tracker mortgage at 5.99%. Mortgage customers are already enjoying lower rates on mortgage products, which have been made possible as result of decreasing inter-bank lending charges due to the billions of pounds in emergency funds that the Bank of England has made available to the money markets.

One mortgage analyst stated: 'The silver lining for mortgage borrowers in this clouded sky that is the credit crisis will be the minimal chance of base rate rising to 6% - it is now more a matter of when the bank's base rate will start to fall.'

Tom Smith
16th October 2007

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