Rising rates push 96% to fix

New data from Mortgage Advice Bureau has found that 96% of homebuyers opted to fix during September for a second successive month, pushing the popularity of fixed mortgage rates to new heights as borrowers are increasingly motivated to lock into fixes while mortgage pricing remains low.

Related topics:  Finance
Warren Lewis
28th October 2015
Mortgage Advice Bureau

In comparison, just 91% of homebuyers fixed between February and April this year, and April 2014 remains the only other time where 96% of homebuyers have done so.

Savvy homeowners are also looking to secure their rates in greater numbers, with 92% of remortgage customers fixing their rates in both August and September. This is the highest proportion recorded since June 2014 when 93% of remortgaging homeowners opted to fix. The intervening period saw fixed rate popularity for remortgages fall as low as 85% in December 2014.

The rush to fix mortgage rates came as Moneyfacts data for September showed that average mortgage pricing across two year fixed, five year fixed and two year tracker rates increased.

The average two year fixed rate rose from 2.68% in August to 2.72% in September, marking the first rise after 12 months of consecutive record lows. Five year fixed rates also rose for the first time since August 2014, while two year trackers rose for the second successive month.

In contrast, the average three year fixed rate reached a new low of 3.10% in September, down from 3.11% in August and 3.71% a year ago.

Despite rising between August and September, two year fixed pricing remains the most improved over the last year. Borrowers looking at short-term two year fixed rates in September will have found the average rate more than one percent lower than it was 12 months before – allowing them to make significant savings in their repayments.

For example, a homebuyer with September 2015’s average loan of £164,525 would save £93 a month or £2,226 over the whole fixed term by taking out a two year fixed rate at the latest 2.72% average rate, compared with September 2014’s average of 3.78%.

Average mortgage rates were also at least 60bps lower over the year across three year fixed, five year fixed and two year tracker rates, showing conditions remain favourable for borrowers.

The total number of mortgage products on the market also reached another new high in September with 16,465 products recorded. This was a 4% rise from August and an increase of 36% over the year from 12,069 in September 2014, as competition continues to intensify.

, head of lending at Mortgage Advice Bureau, had this to say: “Sooner or later, the predictions of an interest rate rise are going to become a reality and some lenders have started to act ahead of this to ensure they are not short changed. Borrowers should not be too alarmed by September’s jump in pricing, as there was only a slight increase and three year fixed rates continued to fall. All the same, it is a timely wake-up call that these rates are not here to stay forever.

Anyone in a position to buy or remortgage should consider making the most of the competitive pricing and thousands of products currently available. There are clear signs in the latest data that an increasing number of borrowers are cottoning onto the trend.”

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