The popularity of fixed rate mortgages continues to increase, with sales up 10% between April and May alone. According to figures from the Council of Mortgage Lenders (CML) 50% of all new mortgages in May were fixed rate products, the highest level since the end of 1998. This compared to a figure of 27% for May 2002.
The CML also noted that, while average new fixed interest rates fell from 4.52% in April to 4.21% in May, the fall in variable interest rates was less significant from 4.14% to 4.10%.
James Rodea, business development director at intermediary Hamptons International Mortgages, has noted similar trends. He said: ‘There also used to be a bigger margin on what you would pay on a variable rate to a fixed rate, but they are more or less comparable now and variable rates are really only for those who expect base rates to fall further. Our view is that this is a possibility.’
He noted that it is possible to fix for five years at less than 4% with a number of lenders including Halifax, Woolwich and Bristol & West. ‘At that rate you really have to consider a fixed product, however if the Government is serious about encouraging longer term fixed rates it needs to ensure lenders bring them down too,’ he said.
Total gross mortgage lending continues to remain very strong, fuelled mainly by remortgaging, at 51% of the £21.5bn total in May, up from £20bn in April. The proportion of mortgages taken out by first-time buyers fell to 30% last month compared with 33% in April and 37% a year earlier.