Consumer uncertainty begins the fixed rate mortgage revival

The latest John Charcol Mortgage Index reveals that 26% of borrowers took a fixed rate in May, the highest level since October 2009.  Drew Wotherspoon, Director of Marketing at John Charcol, comments on this and other findings.

"A combination of widespread uncertainty in the economy, magnified by equal uncertainty in the political landscape, and a significant reduction in their cost, led one in four borrowers to plump for a fixed rate in May.  This is the highest figure for over six months, as some borrowers begin to look for real safety in what are bound to be some choppy years ahead.  The Sword of Damocles is currently hanging right above the UK and no-one can really be confident that it won't fall soon. For those who favour a fix, the recent addition of some new, excellent five and 10 year fixed rates to the market, is good news and I would expect the increase in take up of fixed rates to continue in the coming months."

"Knowing what the future for interest rates looks like is an exercise in crystal ball gazing, but the reality is that there is only one way interest rates can now move - it's just when and by how much.  Some borrowers are undoubtedly still adopting a wait and see approach, but the narrowing in the price differential between fixed and variable rates over the last few months has led some to act now.  In March of this year, the difference in rates between product genres was as high as 2.5%, but this has shrunk to just below 1.5%, which has clearly been enough to tempt more consumers to take a fix.

"What this unquestionably highlights is that borrowers must seek advice on their own specific situation.  Which product is right for them will be dependent on a myriad of criteria, and generic advice simply will not do."

First time buyers still missing in action...

"The proportion of John Charcol clients who are first time buyers has fallen to its lowest level in 18 months, accounting for just 6% in May 2010.  With first time buyers probably more concerned with overall market confidence than any other group of buyers, it is little surprise that they are still noticeable by their absence. Combine this with the need to find bigger deposits and actually getting their hands on a mortgage, I cannot see this pattern changing for some time to come."

Purchases up again

"May saw the recent downward trend in remortgaging reversed, with purchases accounting for 57% of all business.  It will be interesting to see what the next few months bring, as more and more people find it is now worthwhile remortgaging away from lender standard variable rates.  Yet, at the same time, many people are probably waiting for the emergency budget next week to see what potential impact this will have on the economy, and subsequently rates."