The percentage of Hamptons’ clients opting for two- and five-year fixed rate deals has increased 0.63 per cent and 0.43 per cent respectively from June figures (from 23.72 per cent to 24.35 per cent and from 22.09 per cent to 22.52 per cent). However, year on year, two-year fixed rates have seen a slight drop in popularity from 28.98 per cent in July 2005 to 24.35 per cent in the latest figures whilst five-year fixed rates have almost doubled as a percentage of total business from 12.32 per cent in July 2005 to 22.52 per cent in July 2006. This could be explained by the fact that longer term fixes are now very close in cost to two-year fixed rates and so clients are no longer forced to pay a premium for securing a rate for longer.
With the recent rise in the Bank of England base rate from 4.5 per cent to 4.75 per cent, Hamptons predicts a sizable swing towards fixed rate deals in next month’s figures as increased uncertainty about interest rates prompts customers to opt for the security of a fixed rate.
Home purchase mortgages are down significantly from last month to 40.78 per cent from 45.96 per cent. This is due to a combination of the seasonal summer slowdown and the World Cup effect on viewings and, by default, agreed deals.
Remortgage loan-to-value (LTV) ratios are down slightly from 56.75 per cent in June to 53.82 per cent in the July figures. However, LTVs on buy-to-let remortgages have dropped significantly from 70.85 per cent to 66.93 per cent in the latest figures. This could be a result of a predicted slowdown in the housing market, with the latest Halifax House Price Index showing only a 0.2 per cent rise in July, making homeowners nervous about releasing equity from their property.
Jonathan Cornell, technical director at Hamptons International Mortgages, commented: “Murmurings about a possible base rate increase have lead to fixed rates becoming increasingly popular over the last few months as borrowers look for security in their mortgage payments. Now that the highly anticipated base rate has finally happened we expect even more borrowers to flock to fixed rates as the psychological impact of the increase begins to bite.”
