Fixed rate and discounted loans remain borrowers’ product of choice, according to a survey by the Council of Mortgage Lenders (CML).
Discounted rate mortgages account for 17% of mortgages, which suggests borrowers believe volatility in rates is less important than a reduction at the start of the mortgage. Meanwhile, fixed rate mortgages accounted for over 25% of all mortgages in terms of volume in the survey. Bernard Clarke, communications manager for the CML, believes they will remain prevalent.
He said: ‘Fixed rate mortgages will continue to be popular as they give people certainty and in the early stages of a mortgage, people are grateful for that.’
Clarke added that the popularity in discounted rates is also set to continue.
‘At the moment there is a high level of remortgaging in the market and discounted rates are a key factor in that process. Discounted rates will continue to remain popular,’ he said.
The survey has also shown capped rate mortgages are less favourable with borrowers, which the CML said indicates that they believe interest rates will remain low.
Annual review schemes have also declined in popularity, whereby interest is recalculated and credited to the account at the end of the year and then reset for the following year.
Clarke said: ‘There has been a shift away from annual review schemes as lenders are keener to promote products which are based on either monthly or daily calculations of interest.’
CAT-standard mortgages have also failed to generate a lot of interest, according to the research.
Michael Coogan, director general of the CML, believes price is an influencing factor when borrowers decide on a mortgage.
He said: ‘The popularity of discounted mortgages shows UK borrowers are often attracted by price when they take out their mortgage. While fixed rate mortgages remain popular, levels of take-up depend on the rate relative to other products.’