Fixed rate mortgages are on the rise as an unprecedented number of house buyers opt for fixed rates over variable rates.
19 out of 20 borrowers chose a fixed mortgage rate in February, according to the Mortgage Advice Bureau, a new record that exceeded the previous record that was set in January.
This happened just as the average interest rates for two, three and five year fixed rate mortgage rose between 0.06% and 0.08% at the end of January.
This is the first rise from the record lowest rates for two and three year terms that kicked off this year, which were 3.52% and 3.83% respectively. Five year fixed mortgage rates on the other hand have been rising steadily since last August.
The Bank of England has been predicted to raise its main interest rate, and this is likely what has spurred people to go for the fixed rate loans, so that their mortgage prices won’t rise unexpectedly during their term.
The rise, predicted for Spring this year, will have a market wide impact on mortgages as the base rates for all the banks will also rise. People with variable rate mortgages may find themselves paying higher rates than before, so people are turning to the fixed rate alternatives for peace of mind.
Andrew Montlake, director of Coreco said that people should be looking into fixed rate mortgages now because “it’s not going to get any better than this.” He highlighted the fact that five year swap rates have risen from 0.92% last year to 1.92%.
The new regulations coming in on the 26th of April as a consequence of the Mortgage Market Review may also hinder the lending market.
