Re Mortgage Customers Opting For Fixed Rate Loans
A large number of people with homeowner loans have been enjoying the benefits of low monthly repayments on their loan over the past few months, due to the Bank of England reducing the base rate of interest to just 0.5 per cent, in order to combat the effects of the credit crunch and following economic down turn.
In some cases, borrowers with a tracker rate, or standard variable rate loan have seen their monthly repayment fall by hundreds of pounds each month and in this situation it makes it hard for them to think about changing their loan deal, particularly if that change is likely to cost them more money than they are currently spending on their existing loan.
But with the likelihood of interest rates rising again at some point in the not too distant future, an increasing percentage of those borrowers who are opting to switch their existing homeowner loan, are now choosing to go for a fixed rate in order to cover themselves against their variable rate increasing sharply in the coming months. A recent survey conducted by Abbey has found that 85 per cent of people with a homeowner loan would choose a fixed rate loan if they were to re-mortgage at the present time.
The problem for many borrowers though, is when to switch deals. A new fixed rate deal is likely to be more expensive than their current loan at the moment and, human nature being what it is, individuals are likely to cling on to their low variable rate until the base rate starts to increase again, by which time it will probably be too late to find a competitive cheap loan on a fixed rate. Figures from the Bank of England show that there were just 31,800 remortgage cases in April, lower than the figure for March, which shows that, although people know where rates are heading, they appear to be waiting until the last possible moment to take action.
