Mortgage blog: New home buyers still overwhelmingly choosing fixed-rate deals

Posted 27 September 2013

New figures from a leading mortgage broker have shown that an overwhelming majority of new home buyers are choosing a fixed-rate mortgage product. Cheap deals and the peace of mind of guaranteed repayments are responsible for over nine in ten new purchase mortgages being taken on a fixed-rate basis.

However, while new buyers are continuing to take fixed rates, remortgage borrowers are increasingly likely to choose a variable product. The number of remortgage clients taking a variable deal rose from 9.5% in July to 20.8% in August, buoyed by recent Bank of England comments.

Nine out of ten house buyers choose a fixed-rate mortgage

New data from more than 500 brokers and 800 estate agents published in the Daily Telegraph has revealed that 91.2% of new purchase mortgages in August were taken on a fixed-rate basis and just 8.8% on a variable rate. This is a slight decrease on July's figures but higher than the 83.1% of mortgages taken on a fixed rate in August 2012.

"It's clear that the vast majority of people buying a new home want the peace of mind of guaranteed repayments," says Keith Osborne, editor of WhatHouse.co.uk. "Even though the cost of variable-rate deals has fallen, new home buyers like the certainty of a fixed rate and many have been able to lock in at an excellent interest rate."

While new house buyers continue to prefer fixed-rate products, remortgage borrowers are increasingly prepared to take a variable rate deal. 20.8% of remortgages in August were taken on a variable rate, up from just 9.5% in July.

"Recent comments from the Bank of England governor, Mark Carney, have indicated that the Base rate is set to remain at its current level for a further three years," continues Osborne. "With the cost of variable rate deals also falling, consumers are increasingly prepared to accept lower repayments backed by the assurance that they can expect their mortgage rate to remain at this level until unemployment falls significantly."

Date published in the Daily Telegraph showed that the average cost of a two-year fixed-rate mortgage rose in August to 3.69%. However, the average cost of a two-year variable-rate mortgage is now just 3.14%. On a £150,000 repayment mortgage over 25 years the variable rate deal is around £45 per month cheaper.

"If interest rates are set to stay lower then clearly more people are going to be tempted to choose a variable rate if it offers lower repayments," adds Osborne. "However, interest rates only have one way to go and so I expect to see borrowers continue to prefer fixed deals over the next few months."

Click here to find out more about how WhatHouse.co.uk can help you find the right mortgage.

 

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