The percentage of borrowers opting for variable mortgages has increased by 50 per cent in July, according to the Spicerhaart Financial Services monthly mortgage survey.
Despite the base rate rising for the fifth time in a year to 5.75 per cent in July, the percentage of borrowers opting for variable mortgages increased by 50 per cent, demonstrating a growing belief that interest rates have peaked and house price growth will level off in the second half of the year.
The survey reveals that although fixed rate products remained the most popular, with 86 per cent of customers taking these out in July, the percentage of variable mortgages increased significantly from 9 per cent to 14 per cent of all deals.
Within the 14 per cent of variable deals, the highest proportion since October 2006, 11 per cent of borrowers chose mortgages that tracked the base rate, with 1.7 per cent choosing a discount deal and 1.3 per cent opting for other variable rates.
Operations director Steve Cox says: “The increasing proportion of variable mortgages indicates that borrowers are starting to believe that interest rates have finally peaked, as inflation stabilises, and are likely to come back down again before the end of the year. With interest rates still historically low, homeowners and first time buyers, still confident in their financial security, are as keen as ever to move up the property ladder, even if this means borrowing slightly more.”
Fixed rate deals continued to do well, making up 86 per cent of all mortgages in July. The shorter term two year products decreased by 5 per cent from 60 per cent in June to 55 per cent in July. Three year deals and four year plus deals remained the same at 13 per cent and 18 per cent respectively.
The percentage of high loan to value mortgages rose for the sixth consecutive month, to a peak of 21 per cent up from 19 per cent. The level of first time buyers also increased slightly to 37 per cent.