In an attempt to try to combat rising interest rates, first time buyers are eager to acquire fixed rate mortgages with 87% of them now said to be taking this option, compared with 84% in the previous month.
The Council of Mortgage Lenders’ statistics also show that 76% of ALL house loans are of the fixed rate variety.
The Council’s Director General, Michael Coogan perceives first time buyers as the most financially stretched group and considers their decision to embrace fixed rate deals with all the security they bring is a very sensible one indeed.
In addition to avoiding future interest rate rises, one cannot help but wonder if there is another possible reason for fixed rate products’ popularity? The Council of Mortgage Lenders indicate an increase of only 0.16% in fixed rate products, however other various products have increased by more than 0.5%.
On average interest rates on variable rate products rose to 5.68% during the month of February whilst those on fixed rate loans reached 5.34%.
A mortgage specialist from Moneyfacts believes that with over 400 fixed rate mortgage products on the market at the moment, competition is fierce and certain ones are even operating on a loss leading basis.
The general consensus among various financial institutions is that fixed rates are a good idea and you know exactly what your outgoings shall be for the duration of the agreed term. The only drawback could be the rather hefty arrangement fees attached to them and it is not uncommon to discover the lender who has the most competitive rate is the very one who has the highest arrangement fee. In such a case, it is advisable to look at the bigger picture and project the costs involved over the 3+ year timescale.
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