Moneyfacts analysed borrower behaviour when comparing deals on Moneyfactscompare.co.uk, looking at the 30 days to 2 April and the 30 days to 2 March.
It found that demand for two-year fixed mortgages rose 13%, indicating a desire for flexible deals during the period of uncertainty. This coincided with a 9% decline in demand for five-year fixes among homemovers, and a 15% drop among remortgagors.
Borrowers seemed to favour more flexible pricing too, as interest in variable rate mortgages increased by 12%. Among homemovers, there was a 47% jump in demand.
First-time buyers appeared to seek certainty, as demand for variable rate mortgages dropped by 18% and interest in five-year fixes rose by 16%. First-time buyer demand for two-year fixes increased by a fifth month-on-month.
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|
Term |
Total share (February) |
Total share (March) |
Month-on-month change (February to March) |
|||
|
All mortgage borrowers |
First-time buyers |
Homemovers |
Remortgage borrowers |
|||
|
Two-year fix |
48% |
55% |
+13% |
+20% |
+15% |
+11% |
|
Five-year fix |
28% |
25% |
-9% |
+16% |
-9% |
-15% |
|
Variable |
12% |
13% |
+7% |
-18% |
+47% |
-12% |
|
Month-on-month change in users of moneyfactscompare.co.uk comparing mortgage products. Excludes other terms. Users can compare multiple product types and terms per session. Figures rounded to nearest full percentage point. Source: Moneyfactscompare.co.uk |
||||||
Variable rate mortgages have seen the smallest increase compared to other options, as since 1 February, average pricing has risen by 28 basis points (bps), compared to 99bps for two-year fixes and 81bps for five-year fixes.
|
Term |
1 February |
1 April |
Difference |
|
Two-year fix |
4.85 |
5.84 |
+99bps |
|
Five-year fix |
4.94 |
5.75 |
+81bps |
|
Variable* |
4.41 |
4.69 |
+28bps |
|
*Average two-year tracker rate Source: Moneyfactscompare.co.uk |
|||
A shift in borrower behaviour
Adam French, head of consumer finance at Moneyfactscompare.co.uk, said: “The speed and scale of rate rises over the past few weeks has quickly shifted borrower behaviour. With five-year fixes jumping by more than 80 basis points, many are pivoting towards two-year deals in the hope that the rate spike being driven by the conflict in Iran proves short-lived.
“Demand for five-year fixes is usually strongest among homemovers, who value certainty in their monthly payments, particularly as they have usually taken on a larger debt. Instead, there has been a dramatic swing towards shorter-term options. Remortgage borrowers who are already facing significant payment shocks also appear reluctant to lock in at elevated rates for an extended period.”
He added: “Some borrowers may also be banking on rates falling sooner than the market is currently expecting. There has been a notable, if still relatively small, shift towards variable rate mortgages, especially among homemovers.
“While these products remain a minority choice, the uptick suggests some borrowers are willing to take on more risk, betting that rates could fall back in the near term.”
