October sees fall in variable mortgages whilst fixed deal demand grows
October sees fall in variable mortgages whilst fixed deal demand grows : Recent research has indicated that demand for variable mortgage products has dropped to just 5% in October.
The findings from LMS show the change observed in the mortgage market over the past year; whilst demand for fixed deals has grown, the popularity of variable remortgages has taken a downward turn. According to the conveyancing service provider, this shift can largely be attributed to the change in the priorities of borrowers, as the hopes of the Bank rate increasing continue to rise. In turn, this positive prediction has led more and more consumers to want the security of the rate, ensuring that they take advantage of it whilst the opportunity is still open.
As a result, there has been a rise in the popularity of longer-term fixed rate deals, with half of all October’s remortgage transactions being five year fixed deals more than double than last year’s figure of 19%. In contrast, the demand for variable deals has dropped, potentially falling short in terms of certainty for consumers. The desire for certainty and security is not a new source of influence where the mortgage market is concerned. The research shows that October had the greatest amount of remortgage activity since the financial crisis, with over £7 billion being lent.
Nick Chadbourne, chief executive of LMS, commented: “Consumers were correct – borrowers identified that a rate rise was likely, and many smartly capitalised on the situation. This activity drove remortgaging volumes to peak, with the highest remortgage numbers since 2008. There will be interesting times ahead as the Bank of England hint at a long stretch of rises, I suspect many more consumers will opt to fix deals while rates are rock bottom and the market will continue to flourish for the foreseeable future.” “Lenders are tweaking their product portfolios to respond to changing consumer demand and remain competitive. With variable products unable to deliver the security consumers are seeking, this means fixed-rate products are set to stay at the top of the leader board for the foreseeable future.
October also saw a record number of remortgagors predict that interest rates would rise during the next year (78%). This proportion represents a significant shift in the outlook when compared to September when just over half (56%) of remortgagors expected to see an increase. Nick Chadbourne said: “Variable rates do offer a number of benefits that borrowers should consider when they’re getting a new mortgage – including flexibility, lowfees, and lowdeposits.”
But with Brexit looming on the horizon, the market retains a degree of unpredictability. It’s hard to ignore the attractiveness of fixed-rate products at the moment. November’s rate rise ended ten years of falling rates and may well have fired the starting pistol on a decade of increases. Given how easy conveyancing and remortgaging is now – thanks chiefly to technological innovation in the sector RATE RISE EXPECTATIONS 78% 14% – and with these hikes set to continue – it is difficult to imagine that this surge in activity will disappear any time soon.”
Unattributed – Source
Written by: lms_admin, 03/01/18