Fears over the increasing cost of borrowing, prompted by August’s interest rate rise, have caused a rise in mortgage shoppers looking at fixed-term deals.
Analysis by Experian revealed three-quarters of potential borrowers were looking at future-proofing their mortgage rate in September, just a month after the Bank of England pushed its base rate up from 0.5% to 0.75%.
In November, the credit rating agency revealed, 83% of mortgage searches were for fixed-rate products, and this went up further to 84% in November.
It said the increasing cost of borrowing had clearly discouraged potential homeowners from considering tracker mortgages as an option for their loan.
Amir Goshtai, managing director of Experian Marketplace & Affinity, said: “Mortgage shoppers have switched their attention to fixed-term mortgage deals to protect themselves from any future rate rises.
“But it’s important for potential homeowners to consider all their options – after all, buying a house is likely to be the largest purchase anyone will make.”
The importance of switching deals
Experian’s figures also showed the consequences mortgage customers could face if they failed to switch deals when their introductory rate finished and they slipped onto their lenders’ Standard Variable Rate (SVR).
Based on the average mortgage amount taken out by Experian customers in October 2018, which is £151,955, and with a typical SVR or 4.39% over 25 years, a customer would pay £822.41.
But, with an average introductory rate of 2.38% offered to Experian customers in October, those signing up to this product would have repaid £672.55 a month on the same mortgage amount – a difference of £149.86 monthly and £1,798.32 annually.
Goshtai added: “If people are either on a standard variable rate, or approaching the end of their introductory deal, then now is the time find the next mortgage as the potential savings are significant.”
