90 Per Cent Of New Homeowner Loans Being Taken On Fixed Rate
Due to the effects of the recent economic down turn and recession, interest rates on homeowner loans and mortgages have reached an all time low, since the Bank of England set the base rate of interest at 0.5 per cent earlier this year.
With the prospect of economic recovery starting to take effect, possibly by the end of this year and certainly into next year, it seems almost inevitable that the currently low level of interest rates will increase significantly in the not too distant future, as the economy and loan markets begin to improve.
In light of this increased probability of higher homeowner loan costs, a growing number of individuals are opting for a fixed rate when they take out a new loan and according to a new survey from Legal and General, somewhere in the region of 90 per cent of new homeowner loans and mortgages are now being taken out on a fixed rate basis, in order to combat future interest rate increases, despite the average cost of a fixed rate loan deal increasing significantly over the course of the past few weeks.
The figures from Legal and General’s mortgage club, used by a large number of mortgage and homeowner loan brokers, showed that during the second quarter of this year, 87 per cent of all loans were taken on a fixed rate basis, an increase of 16 per cent on the same period for last year.
Stephen Smith of L&G commented on the figures, he said “Borrowers who are prepared to take out variable rates have been few and far between in the past three months and who can blame them? Margins on these products are high and it is almost a cast iron certainty that when the base rate next moves, it will be upwards. Fixed rates have been offering the full package until recently, in that they had been getting cheaper and they offer valuable peace of mind in a turbulent and uncertain environment.”
