Borrowers Swing Back To Fixed Rate Loans
Over the course of the past couple of years or so, there have been particular trends within the choices made by borrowers looking for a new home owner loan or mortgage, particularly when it comes to deciding on what type of loan deal to take out.
When the Bank of England lowered the base rate of interest to the historically low level of 0.5 per cent, a large percentage of borrowers moved away from the more expensive fixed rate loan deals and opted for a variable or tracker rate loan instead, as this was significantly cheaper.
Prior to the fall in interest rates back in 2009, around 90 per cent of all home owner loans were taken out on a fixed rate basis and most of these borrowers will now be paying more than they need to be on their loan.
However by January this year, the trend had shifted to the point where only 46.3 per cent of borrowers took out a fixed rate loan, largely due to the predictions that interest rates would remain low for some time to come and fixed rate loans were still significantly more expensive than a tracker.
But as the year has gone on, more and more individuals are moving back towards taking out a fixed rate loan and it is thought that this is because of uncertainty over the UK economy in the coming months, coupled with the possibility of a rise in interest rates.
By November this year, 65.7 per cent of all home owner loans were taken out on a fixed rate basis, up from 63.6 per cent the previous month, even though many fixed rate loan deals are still more expensive than the alternative.
Brian Murphy of the Mortgage Advice Bureau said “Consumer confidence is still relatively low due to still uncertain economic conditions and therefore borrowers are increasingly opting for the security that fixed rates offer.”
