It is the first time for five years that the popularity of variable rate mortgages has outstripped that of fixed rate mortgages, as borrowers take a shorter-term view, backing interest rates to remain low throughout 2010.
Mortgage Advice Bureau figures show that variable rate mortgages made up 53% of all mortgage transactions in November. This compares with 43% in October. The percentage of fixed rate mortgage transactions has fallen dramatically from a high of 90% in May this year to a low of 47% in November.
The average LTV (loan-to-value) on residential mortgages rose slightly in November compared to October, from 66% to 67%, as did average LTVs on remortgages – from 52% to 53%.
The average mortgage loan in November was £119,415, up from £113,388 in October, while the average remortgage loan in November was £155,334 compared to £141,002 the previous month, an increase of 10.2%.
Brian Murphy, head of lending, Mortgage Advice Bureau, commented: “These latest figures suggest that borrowers believe interest rates will be maintained at low levels for some time yet. Six months ago, borrowers were opting for fixed rate deals in spite of the price differential on comparable LTV variable rate mortgages. That trend now appears to have reversed.
”Borrowers clearly believe that the low interest rate environment is here to stay, and that even if rates were to rise by 1%-2%, the increase in monthly repayments can be comfortably accommodated and still represents better value than the most competitive fixed rate deals on the market.”
