Borrowers opt for fixed rates in Q2

More borrowers chose fixed rates over variable rates in Q2 2009, according to Legal & General (L&G) .

Its sixth report in the 'Mortgage Purchase Index' series analyses trends from thousands of mortgage applications made in the last quarter through L&G's Mortgage Club.

The Q2 2009 key findings included 87% of residential borrowers chose a fixed rate compared to 71% in Q1. Although the average two year fixed rate increased to 5.46% from 4.78% in Q1, average three, five and ten year fixed rates all dropped. Average residential LTV was 60%, whereas for buy-to-let it was 70%.

Stephen Smith, director of housing at L&G says that borrowers who are prepared to take out variable rates have been few and far between in the past three months.

He says: "Margins on these products are high and it's almost a cast iron certainty that when the base rate next moves, it will be upwards. Fixed rates had been offering the full package until recently, in that they had been getting cheaper and they offer valuable peace of mind in a turbulent and uncertain environment. Some of the fixed rates on offer have been very good value, however many are now very much on the rise."

Smith adds: "It feels like we are entering a new phase of the credit crunch now though - talk of a recovery has been gathering pace and fixed rate pricing may well have bottomed out. There has been no significant upturn in house sales or mortgage lending, but both consumer and adviser confidence is up. Let's hope this translates into real results."

stephen.quigley@incisivemedia.com

IFAonline