Variable mortgages more popular
Updated on 05 October 2007
The number of homeowners opting for variable rate mortgages has risen for the third month in a row, suggesting consumers think interest rates have peaked, new figures show.
About 21% of mortgages taken out during September had rates that moved up and down in line with interest rates, the highest level since July last year, according to Spicerhaart Financial Services.
Tracker mortgages are becoming increasingly popular, accounting for nearly all variable mortgages and 19% of all loans, the highest proportion this year.
But the group said fixed rate loans continued to dominate, with 79% of people arranging a mortgage during the month opting for a fixed rate loan, although this was down from 83% in August.
The number of people opting for two-year fixed rate loans also fell for the third month in a row to account for 48% of new mortgages.
Steve Cox, operations director of Spicerhaart Financial Services, said: "The further decrease in demand for fixed rate products, with consumers turning instead towards variable mortgages, demonstrates that borrowers now believe that interest rates have finally peaked.
"The proportion of borrowers opting for longer term fixed rate mortgages, of between seven to 25 years, remain relatively stable, but fixed two-year products have seen the biggest drop, suggesting borrowers expect an imminent drop in interest rates.
"Confident in their financial security, people are hedging their bets and opting for variable products rather than locking themselves into the current high rates."
The research also showed there was a fall in sub-prime mortgages, such as lending to people with poor credit histories, those who self-certify their income and the self-employed, as lenders raised their rates in response to the recent turmoil in world credit markets.
This type of lending fell by 41% from 13.1% of the total in August to 7.7% in September, its lowest level for the past six months.
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