This trend is not totally surprising as the outlook for interest rates is generally considered downwards, however, residential borrowers still prefer fixed rates overall with 63% of borrowers opting for this type of mortgage. Buy-to-let borrowers prefer variable rates, with 55% taking variable rates against 43% fixed rates.
The average residential mortgage was just 60% loan-to-value over the past quarter.
Two year fixed rates have become cheaper, but three, five and ten year products more expensive.
Stephen Smith, Director of Housing at Legal & General said: "As suspected, the popularity of fixed rate mortgages peaked last quarter when we found that three-quarters of borrowers were taking this type of mortgage, compared to 63% in Q3. Trackers will have attracted greater attention as forecasts of base rate cuts become more prominent. The popularity of variable rates has also perhaps been boosted by the number of borrowers sticking with their lender's standard variable rate when they came to the end of a deal rather than remortgaging straight away. This approach of sitting on the fence is a sign of the times and would have been unheard of a year or so ago. Fixed rates over the past three months have been ‘expensive' compared to the beginning of the year, although two-year deals have dropped somewhat recently.
"The average residential borrower has been able to put up a 40% deposit, which indicates that whilst there are many people with healthy levels of debt, there are now far fewer mortgages being offered with high LTVs. This has lead to the average LTV for residential borrowers falling throughout the year. On the other hand, the average LTV for buy-to-let borrowers has risen from 67% to 73%, showing that cash-rich landlords are taking advantage of the increasing demand for rental accommodation."
