Will 2011 be the year of the fixed remortgage?

With no sign of interest rates rising, many homeowners have sat tight on standard rates or opted for trackers. However latest sales data from first direct shows that homeowners may be starting to return to fixed rates in ‘normal' numbers.
Between 2005 and 2009 fixed rate mortgages were overwhelmingly the most popular type of product, accounting for 64 per cent of all mortgages sold in Britain. In contrast, so far in 2010, less than half (47.6 per cent) of new mortgages have been fixed – according to CML data.
This year's sales data from first direct is even more extreme, so far just one in four (25 per cent) of mortgages sold has been on a fixed rate and the most popular of these has been the two year repayment version. However, looking at just the last month sales, fixed rate mortgages have increased to one in three (33 per cent).
first direct's tracker range remain the more popular mortgage choice, but it's clear some homeowners are starting to consider how they might fund an increase in the Bank of England Base Rate and are choosing their new mortgage with that in mind. For example a customer with a mortgage balance of £250,000 who has chosen first direct's 2.39 per cent Lifetime Tracker mortgage would see their monthly payments increase by £267.38* per month should the Base Rate increase by just 2.0 per cent. Compared to no change with a fixed rate loan.
Richard Tolchard, senior mortgage product manager at first direct commented: "The canny homeowner has realised that Britain has been at the bottom of the interest rate cycle for a while and 2011 will be the year when fixed mortgage rates start to move up. Those borrowers keen to stay on a tracker loan need a low flexible mortgage which will allow them to switch out of later in the year with no penalties."