Homeowners are missing out on lowest fixed rate mortgages in decades

Published ¤ 22/09/2011 09:57:16

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With the Bank of England base rate remaining at 0.5% for a record 31 months now, tracking data from unbiased.co.uk reveals the continuation of the "interest rate-spoilt" generation means homeowners may be missing out on the lowest fixed rate deals on the market in decades.

Variable rates still more popular than fixed ratesThe data reveals standard variable rate (SVR) mortgages are still the preferred option with 37% of homeowners, rising from 35% from January 2011. With SVRs remaining lower than best buy fixed rate mortgage deals in the current market place, it appears homeowners are still refraining from remortgaging to a fixed rate deal until the base rate starts to rise.
A huge 46% of homeowners have not reviewed their mortgage at all since March 2009 when the base rate first hit 0.5% and 16% believe the base rate is so low they do not need to worry about reviewing. With fixed rates falling below 5% for the first time in decades and the threat of future interest rate rises becoming more real, homeowners are potentially missing out on the best fixed rate deals.
When it comes to fixing however, the rate homeowners would be prepared to fix at now is an unrealistic 3.4%. This has dropped from an average 4.0% in January 2009. Interestingly the last 24 years has never seen 5 year fixed rates lower than 4.99% and the current average 3 year fixed rate is 4.35%. Despite the current market conditions and fixed rates reaching an all time low, homeowners remain out of touch with what is available to them.
However, fixed rate mortgages do remain popular with 18-34 year olds, where 44% currently have one, a rise of 6% from 38% in January 2011. This suggests the security of a fixed rate is attractive to the "first time buyer" market.Karen Barrett, Chief Executive of unbiased.co.uk comments, "With the base rate now remaining at a record low of 0.5% for 31 months, our tracked research shows that homeowners could be missing out on the opportunity to bag some record fixed rate deals. Once rates begin to rise so will the price of fixed rates, meaning that now could well be the perfect time review their mortgage finances and move to guard against the potential of increased payments in the future. The low base rate has also had a dramatic effect on homeowners' rate expectations with our research showing a stark contrast between what consumers would be willing to fix their mortgage to and the average rate available.
"It can be very confusing for homeowners to keep track of which is the best mortgage for them and when is the best time for them to move onto a new deal. Homeowners should seek whole of market mortgage advice now to ensure they get the best deal from the whole of the market at the right time."
Paul Skinner, from Hampshire mortgage broker PKSPaul Skinner from Hampshire's top mortgage broker, PKS, commented, "Some people's expectations are rather unrealistic, however, there are some amazing deals to be had at the moment. This data shows that people would be prepared to fix if 5 year fixed rates dropped to 3.4%, although many are still concerned about missing out on exceptionally low tracker or variable rates over the next 2 years while interest rates are thought to remain low.
"At PKS, we have a fantastic "Best of Both" deal, which allows the client to enjoy a very low tracker rate for 2 years (1.69% over base), but then provides the security of a further 3 years fixed at only 3.39%. This deal really does offer the best of both worlds, and with the fixed element of the rate lower than 3.4%, this should appeal to all those enjoying low variable rates.
Get in touch with PKS on 0845 226 5009, or click here to send a message.

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