Fixed-rate popularity dips as borrowers take advantage of cheaper trackers

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The proportion of people taking out fixed-rate mortgages is shrinking as an increasing number of borrowers look to take advantage of cheap variable rate loans.

The FCA’s latest Mortgage Lenders and Administrators statistics show 77.6 per cent of borrowers took out a fixed-rate loan in the first quarter, down from 82.2 per cent in Q4 2014 and 81 per cent in Q1 2014.

This has coincided with the rate of the average variable rate loan falling to 2.58 per cent, down from 2.94 per cent a year earlier. Fixed-rate loans have also shrunk over the past 12 months, from 3.32 per cent in Q1 2014 to 3.13 per cent in Q1 2015.

Mortgage Advice Bureau head of lending Brian Murphy says: “Mortgages have never been so affordable, and this is having a significant impact on borrower behaviour.

“More borrowers are now willing to move away from the safety of a fixed rate mortgage to take advantage of rock-bottom variable rates, with the proportion of new fixed rate loans falling below 80 per cent for the first time in fifteen months.”

The figures show lending to have been subdued in the first quarter, with gross advances down 3.2 per cent from £47.1bn in Q1 2014 to £45.6bn in Q1 this year.

While residential lending was down, buy-to-let lending increased. There was £7.6bn advanced to landlords in Q1, up from £6.8bn a year earlier.

Capital Economics property economist Matthew Pointon says: “The introduction of new mortgage regulations depressed mortgage lending over the past year and has incentivized lenders to turn to the non-regulated sector. Non-regulated loans, mainly buy-to-let, now make up 19 per cent of all new mortgages.”