Charcol: Fixed rate applications surge to 8 out of 10 new mortgages

The first quarter of 2009 has seen one of the biggest ever changes in the take up of fixed rates according to a new monthly mortgage index from leading UK mortgage broker John Charcol. Based on mortgage business written by John Charcol, the index shows a huge increase in the percentage of fixed rate mortgage applications from 29.1% in December 2008, through 47.8% in January and 67.4% in February to 80.9% in March.

Ray Boulger of John Charcol comments, "The increase comes as a result of a combination of several factors, the most obvious being that with Bank Rate now at 0.5% there is only one way for it to go - the only questions being the timing and the scale and speed of the increase.

"Another important factor is that the historically huge margins above Bank Rate now being charged by lenders for new tracker mortgages means that the risk of being locked into an expensive tracker mortgage when rates go up outweighs the fact that initially a fixed rate is a little more expensive. A third factor is that until recently there were no trackers available above 75% LTV and so borrowers wanting more than 75% couldn't have a tracker even if they wanted one."

In the first quarter of 2008, as Bank Rate fell towards 5% and it looked as if it wouldn't fall much further, the take up of fixed rates accelerated rapidly and in the second quarter stabilised at around 60%. However, when by mid year further rate cuts looked on the cards fixed rate take up fell away sharply to 26.5% in July and then fluctuated between 14.2% and 23.4% for the next 4 months, before starting to increase again following the Bank Rate cut to 2% in December.

The John Charcol Mortgage Index will be published monthly, tracking three important statistics, based on mortgage business written by John Charcol. The index is a leading indicator of trends being based on mortgage applications submitted to lenders, whereas figures reported by the Council of Mortgage Lenders (CML) and the Bank of England (BofE) are based on completions, which typically take place 2-3 months after the mortgage application is submitted.

The three statistics tracked each month are the percentage split:

Between Fixed rates, Capped rates and Tracker/Discount rates.
Between Purchases and Remortgages.
Of First Time Buyers compared to all Purchasers.