Borrowers appear to have given up guessing which direction interest rates will go, with a growing number opting for longer term variable rate mortgages of three years and above.
Hamptons Mortgages has seen the proportion of longer term variable rate lending rise 13.11 per cent in the last month alone (from 10.67 per cent in September 2007 to 23.78 per cent in October 2007) and increase by 16.16 per cent in the last six months (from 7.62 per cent in April 2007).
The proportion of longer term fixed lending also increased by 4.55 per cent since September 2007 (from 5.91 per cent in September 2007 to 10.46 per cent in October 2007).
In stark contrast, the proportion of both two-year fixed and two-year variable lending decreased in the last month by 5.77 per cent and 11.89 per cent respectively (decreasing from 27.81 per cent in September 2007 to 22.04 per cent in October 2007; and 55.61 per cent in September 2007 to 43.72 per cent October 2007).
Thus borrowers are opting for longer term mortgages to avoid short-term financial instability.
Jonathan Cornell, managing director of Hamptons Mortgages, said: “It would appear that borrowers are choosing to opt for longer term mortgages as they, like everyone else, are none the wiser as to what will happen with interest rates and are tired of second guessing.
"Last week, predictions of interest rate direction in the New Year were rife, with some suggesting they will return to a low of 4.75 per cent.
"It strikes me as unlikely that they will go as low as this but I think it is a strong possibility there will be a rate cut in the first few months of 2008. Should this happen, those moving to variable rate mortgages now will be laughing.”
