A survey by ICM for Direct Line Financial Services has found that this has prompted UK homeowners to think about moving their mortgage to the safety of a fixed rate deal to provide longer term stability.
RBS Group Chief Economist, Jeremy Peat commented:
"Under our central forecast, while interest rates are likely to stay constant this month, there is likely to be a further 0.25% increase in base rate in May to 4.25%, with rates increasing further during the year and reaching 4.75% by the end of 2004."
A new survey from Direct Line Financial Services revealed that the prospect of higher interest rates causes concern for both homeowners and industry experts. The Direct Line survey, which is the first in a series of these surveys, compares the different views of UK homeowners against industry experts – personal finance journalists, on mortgage interest rates. Interestingly, homeowners appear more pessimistic than journalists about an increase in base rates, but journalists are more likely to take action if rates do rise.
The key findings of the survey revealed that:
* 64% of UK homeowners think rates will go up at next MPC, compared to only 48% of personal finance journalists.
* By the end of the year, UK homeowners expect base rates to hit 5% or more, while most personal finance journalist expect them to reach between 4.50% - 4.75%.
* Both UK homeowners and personal finance journalists would worry even if their monthly mortgage payments increased by £25.
* If interest rates do go up, 40% of UK homeowners and 50% of personal finance journalists say that they will move their mortgage, preferably to the safety of a fixed rate mortgage.
* Fixed and capped rate mortgages are more popular amongst journalists than the population as a whole.
Paul Hemingway, Mortgage Manager at Direct Line Financial Services said:
"The survey findings mirror the huge surge in demand from customers for our fixed rate mortgages over recent months. As interest rates have started to creep up, so too has the call for our fixed rate deals. After enjoying the benefits of falling interest rates, more and more customers now want the security of a fixed rate as base rates look set to climb.
"Another indication that consumers are now taking a longer term view is the demand for our five year fixed mortgage is outstripping demand for our two and three year deals.(4) And while fixed rates have historically been more popular with first-time buyers, Direct Line is now seeing a shift in customers across the board remortgaging to a fixed rate, rather than a variable rate mortgage."
