BSA reassures brokers on long term fixed rates

The Building Societies Association has sought to reassure brokers that mutuals are doing everything they can to offer clients longer term fixed rates following suggestions of a 2-year fixed rate bias.

Paul Broadhead, head of mortgage policy at the BSA, said there are currently 14 lenders in the market that offer borrowers the opportunity to fix their mortgage rate for over five years.

Seven of those lenders are building societies.

He said: “In recent years borrowers have tended to favour 2-year fixed rates rather than longer terms; this has been the case largely since we moved to a fully advised mortgage market.

“The average initial rate for the products provided by building societies is 3.48% which compares favourably to the 4.09% for other providers.”

Broadhead’s comments followed the publication of the Association of Mortgage Intermediaries’ quarterly economic bulletin yesterday in which the broker trade body raised concern that “in some pockets of the market lenders are reluctant to offer borrowers longer term stability on remortgage rates”.

The AMI report said: “Our members have noted that building societies in particular are focusing their efforts on making shorter term fixed rates more competitive so that borrowers are less able to fix payments over five years without moving lender.

“This appears to be a consequence of pressure on their prudential model. Whether this also reflects uncertainty or a lack of confidence to sell longer term fixed rates to borrowers remortgaging through execution-only mortgage sales is unknown.”

Broadhead added that Prudential Regulation Authority guidance does mean that “some building societies can only provide fixed rate mortgages on a relatively small proportion of their lending”.

But he said: “This has not affected the sector’s appetite for providing competitive products that suit borrowers’ needs.”