Spicerhaart Financial Services has revealed that the percentage of borrowers opting for variable mortgages increased for the third consecutive month in September. This is largely due to the market turmoil leading borrowers to believe that rates are now as high as they will go.
According to the survey, the proportion of variable mortgages rose to 21 per cent in September, up from 19 per cent in August. Tracker mortgages in particular are becoming increasingly popular and are at their highest percentage this year with 19 per cent of borrowers choosing them; this figure is 13 per cent higher than at the same time last year.
Although fixed rate products continue to dominate, with 79 per cent of borrowers opting for these in September, two year fixed rates have fallen for the second month to 48 per cent.
Steve Cox, operations director of Spicerhaart, said: “The further decrease in demand for fixed rate products, with consumers turning instead towards variable mortgages, demonstrates that borrowers now believe that interest rates have finally peaked.
“The proportion of borrowers opting for longer term fixed rate mortgages, of between 7 to 25 years, remain relatively stable, but fixed two year products have seen the biggest drop, suggesting that borrowers expect an imminent drop in interest rates. Secure in their financial security, people are hedging their bets and opting for variable products rather than locking themselves into the current high rates.”
The percentage of first-time buyers remained stable at 40 per cent in September, demonstrating that the group are more confident under the backdrop of stabilising house prices and are looking to buy now before prices start to go up again.
The survey also shows a drop in non-conforming mortgages as consumers react to the increased rates now being offered by lenders. Non-conforming lending fell by 4.1 per cent from 13.1 per cent in August to 7.7 per cent in September, the lowest rate in the last six months. The proportion of non-conforming mortgages had previously increased steadily from 10 per cent in April 2007.
Cox concluded: “The drop in non-conforming lending witnessed last month is a natural reaction from consumers as lenders reprice their products and alter their lending criteria in the wake of the credit crunch. The mortgage market is in a state of flux and consumers coming to the end of their fixed rate mortgages should seek advice sooner rather than later to ensure they secure the best deal.”
