Borrowers confused about which mortgage to choose

Two fifths of all homeowners would be confused about whether to opt for a fixed or tracker rate mortgage if they were choosing a new deal tomorrow (7 August).

In advance of tomorrow's base rate decision and in light of the last three-way split among the MPC, this increased uncertainty amongst homeowners is not surprising. In its monthly study of nearly 700 mortgages, Abbey's Remortgage Index found that in July, 41 per cent were unsure which type of mortgage they would opt for compared with just 30 per cent last month.

Fixed rate mortgages are still the most popular type of deal - with 47 per cent opting for the security that they provide. Of that figure, six per cent of homeowners would opt for a two-year fix if they were to remortgage tomorrow, compared with seven per cent last month and eight per cent the month before. Three-year fixes remain the most popular option with more than one-in-five saying they'd choose this if they were remortgaging tomorrow.

Five-year fixes have reduced slightly in popularity for the third consecutive month, with 22 per cent opting for this product, compared to 27 per cent last month and 30 per cent in May 2008, while demand for longer-term fixes continues to increase. Six per cent of respondents opted for a ten-year fix, compared with five per cent last month and just three per cent in May.

One-in-ten (10 per cent) stated that they would opt for either a two-year or flexible tracker if they were to remortgage tomorrow - up from eight per cent last month and seven per cent in May 2008.

Phil Cliff, Director of Abbey Mortgages, comments: "The current uncertainty surrounding base rate decisions and the general uncertainties on the market at the moment are clearly feeding through into consumers views on mortgages. However, in times of uncertainty, people want security and nearly half of all borrowers saying they'd choose to fix if they remortgaged tomorrow, most choosing a three-year deal."

"Given the demand for this length of deal, Abbey recently expanded the three-year range with two low fee choices. Abbey also has a market leading three-year fix at 5.99 per cent with £1,695 fee for those who want to keep monthly payments to a minimum."

Abbey is also cutting rates on a number of its two and three fixed and tracker rate deals today by up to 0.1 per cent. A two-year tracker with Abbey at 75 LTV now starts from 5.89 per cent with £995 fee.

For more information, visit abbey.com