Borrowers opt for stability and certainty

Almost one-in-three homeowners (5.1 million people) would choose to fix the interest rate on their mortgage for five or more years if they had to renew their mortgage now, according to research from Abbey Mortgages.

Despite the fact that interest rates are widely predicted to decrease over the next year, 2.5 million people (14 per cent of homeowners) would opt to fix for five years, 1.1 million (6 per cent) would fix for ten years and 1.5 million (9 per cent) wanted to fix for fifteen years.

Demand for five year fixes even outstripped the usually popular two-year fixes. In summer, over 40 per cent said they’d opt for a two-year fix, whereas just 12 per cent of the home-owning population would now choose this option. Trackers were slightly up in terms of popularity, also at 12 per cent, however this is still lower than the demand for five-year fixes.

Why do people want to fix?

Amongst the 8.8 million people who favoured a fix, 5.7 million (65 per cent) stated that regardless of the Bank of England base rate, they would like to know exactly what their monthly outgoings would be. A lack of understanding of tracker mortgages amongst homeowners was also identified, with around 700,000 (8 per cent) saying that they preferred to fix because they didn’t understand tracker mortgages.

Nici Audhlam-Gardiner, Head of Mortgages at Abbey said: “For most of us our mortgage is the biggest financial commitment we make so it’s understandable that we want to know just how much we’re going to have to fork out each month.

“You never know what’s going to happen in the future, but at least if you’ve committed to a long term fixed deal, you know where you are going to stand with your repayments. Borrowers need to be sure however that the deal they take out is right for them and that they understand the different types of mortgages available before signing up to anything.”

Abbey this week reflected the appetite for longer-term fixed rate products by announcing rate cuts to its long-term mortgage range. Ten and fifteen-year fixed rate products are now on offer for the price of Abbey’s normal five-year fixed rate deals at 5.79 per cent with £595 fee. Also three-year fixed rate products are currently available for the price of Abbey’s normal two-year fixed rate product at 5.79 per cent with £675 fee.