The number of borrowers seeking fixed rate mortgages has surged ahead of the prospect of an interest rate rise this Thursday, according to Yorkshire Building Society.
The Bank of England’s Monetary Policy Committee (MPC) is expected to raise interest rates from record lows of 0.25% to 0.5% at its latest rate-setting meeting. The ratio of fixed rate to variable rate mortgage applications received by Yorkshire Building Society increased from 35:1 in August to 64:1 in October.
This increase in fixed rate mortgage applications comes in spite of the Yorkshire offering its lowest mortgage rate ever – namely a two-year discounted standard variable rate (SVR) deal with an interest rate of 0.87%.
Concern over an interest rate hike is forcing borrowers to turn to fixed-rates for greater security and stability. The MPC’s decision on interest rates will be announced at 12pm on Thursday, with a rise for the first time since July 2007 widely expected by industry commentators. This position has been further bolstered by recently released growth figures, which saw the UK’s economy perform slightly better than expected in the third quarter (growing by 0.4% instead of 0.3%).
Coupled with inflation being at a five year high of 3%, unemployment at its lowest levels in 40 years and worries over rising consumer debt, the Bank is expected to act to reverse the further cut it made in the aftermath of Britain’s vote to leave the EU.
“With increasing speculation that the Bank of England could trigger a rate rise this week, our data indicates borrowers are keen to secure a deal before any potential increase,” Simon Broadley, senior manager at Yorkshire Building Society, commented.
“Despite having the lowest ever variable rate mortgage on the market, our findings demonstrate that borrowers value being able to lock-in to a fixed rate deal and know that their monthly payments won’t change during their initial term.”
The Yorkshire’s fixed-rate mortgages currently start from 1.21% for a two-year mortgage at 65% loan-to-value (LTV), while alternatives include a 1.48% three-year fixed rate deal for customers with a 65% LTV (with a £995 mortgage fee).
Meanwhile, the building society also offers first-time buyers with a 5% deposit 3.39% two-year fixed rate mortgage. This comes with a £995 fee and £250 cashback on completion.