Variable rate mortgages 'see rise in popularity'

Posted: 28 Aug 2009 09:50:07 GMT

Homeowners are moving away from taking out fixed-rate mortgages and are moving over to variable rate, an independent mortgage adviser has said.

Despite fixed-rate mortgages dominating the home loan market during the four months to June of this year - at 84 per cent market share - this has fallen back to 65.3 per cent in July, noted Ray Boulger of John Charcol.

This is due to an increase in the cost of a fixed-rate loan and the slight increase in the availability of tracker products, he said.

Mr Boulger said: "The rapid increases in the cost of fixed rates during June eroded their value in insuring against future interest rate increases and so in July we advised more clients to take a tracker or discount rate."

He commented that figures from the company indicate that people buying a home were more likely to opt for a variable or tracker mortgage if they were taking out a large loan.

This gives them the option to be able to overpay on the typical maximum on a fixed-rate product of ten per cent (without having to pay an early repayment fee).

Gross mortgage lending reached approximately £16 billion in total in July, 36 per cent down on figures from 2008, according to the Council of Mortgage Lenders.


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