Fixed rate mortgages fall out of favour

The number of homeowners opting for a fixed-rate mortgage fell in October to its smallest market share since November 2008.

Just 26.3 per cent of people chose to fix their mortgage rate last month, down from a recent peak market share of 83.1 per cent in June this year, according to mortgage broker John Charcol.

The popularity of fixed-rate mortgages has declined since June as the outlook for interest rates remains unchanged.

Drew Wotherspoon, spokesman for John Charcol, said the Bank of England’s decision to extend its Quantitative Easing programme by a further £25bn is another indication than the bank rate is unlikely to rise in the next few months.

“Even if longer term fixed rates don’t get much cheaper than those currently available at just under 5 per cent, there seems a good prospect that borrowers on a variable rate will be able to benefit from rates more than 2 per cent lower for the time being and then switch to a similarly priced fixed rate later,” he said.

John Charcol’s month mortgage index also found first time buyer activity as a percentage of total purchases had increased to 15.3 per cent, up from 10.4 per cent in September.

Mr Wotherspoon said although many potential first time buyers are still shut out of the market because of the lack of an adequate deposit or failing to meet lenders’ onerous credit score requirements for high loan to value mortgages, several lenders have improved their and availability of mortgages to 85 per cent and 90 per cent LTV over the last month.