Few economists are expecting any change in the Bank of England base rate in the near future and current sentiment suggests that the base rate may remain at its historic low of 0.50% until 2014 or even 2015.
Against this backdrop independent financial research company Defaqto analysed the type of prime residential mortgages available both now and historically to see which type of mortgages are most commonly on offer.
The research found:
• Fixed rate mortgages have increased from 49% to 68% of available mortgages over the past five years
• Base rate tracker mortgages available have fallen from 27% to 17% of available mortgages during the last two years
• Two year fixed rate mortgages continue to be the most numerous in terms of product availability and now make up 30% of available mortgages
• The number of long term (10 years plus) fixed rate mortgages has plummeted from 151 in February 2008 to only nine now. In March 2011 there was only one available
• Lifetime base rate tracker mortgages have reduced from 12% of available mortgages to only 2% over the last four years
David Black, Defaqto’s banking specialist, said: “Two, three and five year fixed rates together with the two year base rate tracker mortgages now make up 75% of the mortgage products available from lenders.
“Prospective borrowers have to take a view on whether to pay a premium for the certainty of a fixed rate mortgage or to take a chance on suffering possible future rate increases with a base rate tracker mortgage.
“Currently the average fixed rate mortgage has a 0.30% to 0.80% higher interest rate than the average base rate tracker mortgage with the same initial rate period.
“When you’re looking for a mortgage it’s also worth paying attention to the relative competitiveness of the lender’s standard variable rate because these vary considerably, and as many borrowers have recently discovered, it may be something you’re eventually stuck with.”
