To Fix, or not to Fix, is no longer the question.

Posted on 11 March 2013 by Simon

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To Fix, or not to Fix, is no longer the question.

Over the past few months we've seen fixed rates become more popular than ever, with 75% of borrowers opting for security since the start of the year.

With bank rate having remained routed to the floor for four years, you might think that there would be little change in the types of mortgages people are taking out year on year, but this couldn’t be further from the truth.  Flashback to the start of 2012, and the breakdown of products being taken out by John Charcol clients was more or less split 50/50. Come back to 2013 and the landscape has changed dramatically, with 75% of borrowers now taking a fixed rate.

As many high street lenders continue to advertise their latest, and cheapest, two year deals, at John Charcol we believe there is much more value in five year fixed rates and have seen an increase of 159% in the take up of 5 Year Fixed rates being advised in the past 12 months.  More and more we’re seeing borrowers turning to brokers as they want not only advice, but to know that someone is looking after their financial security.

With the global economic outlook still very uncertain, the eurozone unresolved and now the UK having lost it’s much prized AAA credit rating, growing numbers of borrowers concur with the value in being able to batten down the hatches for the next few years. It is comforting to know that whatever else may happen, you know exactly what you’ve got to pay on the mortgage.

This upsurge in the popularity of longer term fixed rates mirrors our view that while the bank rate is going nowhere fast in the next few years, the reduced margins between fixed and variable rates, means that the premium borrowers are paying for the peace of mind that payment security brings, is well worth it.

Job security, changing employment situations, having children (they cost), advancing age, availability of credit,  paying the mortgage off early, are all factors that are now getting borrowers to look at the bigger picture, where previously they would have been chasing whatever the cheapest 2 Year monthly payment was.

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