Mortgages Direct’s monthly survey revealed that 75 per cent of borrowers opted for two-year fixed rate deals from only 60 per cent last month, as homeowners are fearful that the base rate will rise further in the near future.
Fixed rate deals, which have not changed since the Bank of England’s decision, are now more competitive than they had been previously. They have been increasing over the last 12 months as lenders had factored in the anticipated Base Rate rise. In contrast, tracker and variable mortgages have already increased in line with the latest change in base rate, last month.
Peter Gladdy, director of Mortgages Direct, commented:“Despite today’s decision to hold interest rates, it is widely expected that rates will rise further this year. Borrowers are now a lot more cautious since the widely anticipated rise in interest rate eventually came to fruition. They are not prepared to take the chance that the rates will remain low and are therefore securing their loans at the current levels. The Base Rate rise has not yet had any significant impact on the volume of mortgages taken out but, with debt servicing cost at a record high, any further rise could cause a substantial change in homebuyer attitudes and significantly dampen activity in the housing market.”
