The expectation that low interest rates will remain for up to three years coincided with more homebuyers and remortgage applicants choosing variable rates in August than any other month this year, according to the National Mortgage Index from Mortgage Advice.
With Bank of England governor Mark Carney issuing forward guidance on interest rates, the popularity of variable deals among people remortgaging their homes more than doubled in August (20.8 per cent vs. 9.5 per cent – July).
This pushed the popularity of variable rates for remortgages to its highest point in over a year, since 23.3 per cent of consumers made the same choice back in July 2012.
Using data from more than 500 brokers and 800 estate agents, the National Mortgage Index also showed that – while more than nine in ten homebuyers continued to favour fixed deals in August (91.2 per cent) – this was down by 1 per cent from July and the lowest since November 2012 when 89.7 per cent applied for fixed rates.
However, homebuyers in London defied the trend towards fixed rates, with 91.8 per cent opting to fix in August: the first time this figure has passed the 90 per cent marker during 2013. Just 82.7 per cent of buyers in the capital chose fixed rates in July and just 71.5 per cent back in August 2012.
The general shift towards variable deals was fuelled by the first increase in two and three year fixed rates for over a year. The average two year rate rose for the first time since June 2012 to 3.69 per cent, having stood at 3.63 per cent in July 2013. Average three year rates also rose for the first time since July 2012, up from 4.02 per cent in July 2013 to 4.06 per cent.
In contrast, two year trackers continued to fall in August as they have done every month this year, with an eighth consecutive drop to 3.14 per cent in August from 3.28 per cent in July. Average five year fixed rates also fell to a new low of 3.83 per cent: the lowest seen in over six years.
