The popularity of variable deals among people remortgaging their homes more than doubled in August to 20.8% compared with 9.5%, according to the National Mortgage Index from independent mortgage broker the Mortgage Advice Bureau.
This is put down to Bank of England governor Mark Carney issuing forward guidance on interest rates, and thus increasing the popularity of variable rates for remortgages to its highest point in over a year.
Using data from more than 500 brokers and 800 estate agents, the National Mortgage Index also showed that, while more than nine in 10 home buyers continued to favour fixed deals in August this was down by 1% from July and the lowest since November 2012 when 89.7% applied for fixed rates.
However, home buyers in London defied the trend towards fixed rates, with 91.8% opting to fix in August: the first time this figure has passed the 90% marker during 2013. Just 82.7% of buyers in the capital chose fixed rates in July and just 71.5% back in August 2012.
The general shift towards variable deals was fuelled by the first increase in two and three year fixed rates for over a year. The average two year rate rose for the first time since June 2012 to 3.69%, having stood at 3.63% in July 2013. Average three year rates also rose for the first time since July 2012, up from 4.02% in July 2013 to 4.06%.
In contrast, two year trackers continued to fall in August as they have done every month this year, with an eighth consecutive drop to 3.14% in August from 3.28% in July. Average five year fixed rates also fell to a new low of 3.83%: the lowest seen in over six years.
Competition between lenders continued to push product numbers up with 11,043 available on average during August. This was 8% more than in July, the biggest monthly increase since April 2011, and means the range of products on offer has grown by 350% in the last four years, from 3,158 in August 2009.
‘These figures clearly show how influential the Bank of England can be on borrower sentiment. Analysts may question whether interest rates can remain on hold until 2016 if the economy builds on recent progress and continues to emerge from the gloom. But the house buying public are clearly open to reassurance from the Bank, with more people willing to trade in the security of fixes this month for the benefit of lower rates,’ said Brian Murphy, head of lending at the Mortgage Advice Bureau.
‘With five year fixed rates falling by 0.05% and two year fixed rates up by 0.06%, there are still plenty of reason to consider locking down for longer. With Londoners bucking the trend this month...
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