Based on mortgage business written by John Charcol, the index shows a huge increase in the percentage of fixed rate mortgage applications from 29.1 per cent in December 2008, through 47.8 per cent in January and 67.4 per cent in February to 80.9% in March.
Commenting, John Charcol’s Ray Boulger said, “The increase comes as a result of a combination of several factors, the most obvious being that with Bank Rate now at 0.5 per cent there is only one way for it to go – the only questions being the timing and the scale and speed of the increase.
“Another important factor is that the historically huge margins above Bank Rate now being charged by lenders for new tracker mortgages means that the risk of being locked into an expensive tracker mortgage when rates go up outweighs the fact that initially a fixed rate is a little more expensive. A third factor is that until recently there were no trackers available above 75 per cent LTV and so borrowers wanting more than 75 per cent couldn’t have a tracker even if they wanted one.”
In the first quarter of 2008, as Bank Rate fell towards 5 per cent and it looked as if it wouldn’t fall much further, the take up of fixed rates accelerated rapidly and in the second quarter stabilised at around 60 per cent. However, when by mid year further rate cuts looked on the cards fixed rate take up fell away sharply to 26.5 per cent in July and then fluctuated between 14.2 per cent and 23.4 per cent for the next 4 months, before starting to increase again following the Bank Rate cut to 2 per cent in December.
