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78% take fixed rate mortgages in April, says John Charcol

John Charcol’s mortgage monitor has found that 78 per cent of mortgages were arranged on a fixed rate in April, up from 64 per cent of borrowers in March.

Technical manager Katie Tucker says: “This is very high on trend. These peaks normally occur when Bank rate rises are expected, but as Bank rate is widely expected to fall over the next year most of the high take-up was because fixed rates were a quarter to a half a percent cheaper than trackers.

“Nonetheless, this second consecutive jump may also imply that borrowers are nervous about the strength of the economy and fear that rates will soar as they did in the early 90s, but such a hike is extremely unlikely; the economy as a whole is strong, economic growth is a priority for the MPC, and unlike during the early nineties, when bank rate policy was straight-jacketed by the Exchange Rate Mechanism, we are unlikely to fall into such a recession.”

First time buyers made up only 4 per cent of John Charcol mortgagers in April, down from 7 per cent in March, and less than half of last year’s average of 10 per cent.

Tucker says that purchases from all buyer types have fallen to fewer than 20 per cent of mortgage transactions, supporting the Bank of England’s figures that new purchases have fallen by 44 per cent year on year.

“Borrowers with small deposits needing a higher income multiple have fallen out of the race. It is more important than ever to have a spotless credit history and a 10 per cent deposit.”

Demand for buy to let purchases continued to fall in April, making up only 2.5 per cent of total mortgage applications.

“Buying to let is a relatively new concept, so predicting activity in a downturn is unchartered territory. Where 90 per cent loan-to-value buy to let mortgages were freely available this time last year, lenders have now reverted to demanding a 15 per cent deposit, some 25 per cent.”


L&G says adviser confidence crunched

Legal & General is seeing a drop in adviser confidence as a direct result of the credit crunch. The mortgage division of L&G saw a 50 per cent drop in the number of advisers predicting better sales and protection sales are also expected to decline.

In the interim

Paraphrasing the line from that great film Jaws: “Just when you thought it was safe to go into the water” seems very appropriate on hearing the news that you have to be working for the client to be an adviser.

Against the grain

The FSA’s interim report on the RDR aims to boost consumer confidence in the retail financial products market by marking a separation between sales and advice. The argument that these changes are necessary to allow customers to tell the difference between advice and selling is spurious. The market has been operating for 20 years with tied and independent advisers distinguishing themselves with mandatory disclosure without evident problems.


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