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57 % residential mortgages on fixed rates, says L&G

Legal & General’s quarterly index has found that 57 per cent of residential mortgages were on fixed rates compared to just 35 per cent for buy to let.

It also found that average loan to value for residential mortgages is 66 per cent versus 76 per cent for BTL.

Average two year fixed rates were 5.87 per cent compared to 5.82 per cent for five year deals.

The data is based on over 28,000 applications over the past three months.

Director of housing Stephen Smith says: “More than half of the 28,000 mortgages through our mortgage club in the past quarter were fixed rates, but there is a distinct difference in attitude to risk between residential and buy-to-let borrowers. Owner-occupiers continue to require the peace of mind that a fixed rate mortgage provides, whereas landlords feel more comfortable on variable rates. Many lenders had upped the margins on their tracker rates last year as a result of the well-publicised credit problems, making them less appealing to the borrower. They have clearly seen this as an opportunity to rebuild margins following erosion of mortgage profitability dues to a competitive market.

“If more residential borrowers had selected trackers rather than fixed rates over the past quarter then they would have benefited from the two recent base rate cuts. We would ordinarily expect to see the proportion of tracker rates rise considerably over the next quarter, however lenders have been reducing the discounts applied to trackers and in effect raising rates. Fixed rates are therefore likely to remain popular.”


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