In their latest report on the mortgage market, the Council of Mortgage Lenders reported fixed rate mortgages have become the most popular choice for borrowers, as they look for peace of mind in these uncertain times.
London & Country’s own data confirms this and further analysis shows many borrowers opting for longer term fixed rates over 3 and 5 years, as there is no longer a wide margin between these and the once more popular 2 year deals.
Borrowers considering a fixed rate mortgage of any length, should take into account any early repayment charge (ERC - Mortgage jargon buster) attached to the scheme alongside the rate and any fees. ERC’s are usually applied for the fixed rate period, and could have a big impact should you wish to move house, or repay some of the mortgage during the fixed term.
As household costs such as food, utilities and fuel have risen, so the option of having your mortgage payments fixed, has looked more appealing. However, this peace of mind looks likely to get more expensive, as recent inflation figures have caused many experts to revise their interest rate predictions for the year.
Only a few months ago Base Rate forecasts of 4%-4.5% for the year end were common, but now some experts are speculating on how many base rate increases we’ll see before inflation is under control. These gloomy predictions have caused a stir in the money markets where swap rates, (which influence the price of fixed rate mortgages) have surged to their highest point this year.
Some lenders, such as Nationwide, Abbey and Woolwich have been quick to react to this, and have increased their fixed rates. Our advice remains as it has been for much of the year but with added urgency; If you are buying a property or your current deal is coming to an end in the next six months, act now as things are likely to get worse before they get any better.