An unprecedented number of homebuyers opted to fix their mortgage rates in February as average fixed interest rates rose across the board, according to the National Mortgage Index from Mortgage Advice Bureau, the UK’s leading independent mortgage broker.
The fixed rate frenzy came as average interest rates for 2, 3 and 5 year fixed mortgages all rose by between 6 and 8 basis points (bp) between January and February.
Using data from Moneyfacts.co.uk, the Index shows that 5 year fixed mortgage rates have steadily crept up over the last 6 months since hitting their lowest point in August 2013. Average 2 year and 3 year rates both set new record lows in January before starting to climb in February.
In contrast, average tracker rates fell by 6bp between January and February to 2.82% - the lowest recorded in over 6 and a half years since MAB’s records began in June 2007.
Using data from more than 500 brokers and 800 estate agents, the Index reveals that February saw 33% more buyer applications than January and 62% more than in February 2013. The volume of remortgage applications recorded a more subdued – but significant – growth of 16% since January and 49% since February 2013.
Fixed rates remain popular for remortgages with 89% of applicants opting to fix last month, although this has fallen from a high of 92% in October.
Brian Murphy, head of lending at Mortgage Advice Bureau, feels that buyers are very much aware that this golden age of low priced mortgages will not last indefinitely. The surge of activity should help to keep rates competitive, but consumers may struggle to find many better deals in the months ahead than those already out there.
He said:
“Five year rates have been creeping up since last summer, so the chance to lock into a low interest rate is well worth considering. With property gaining in value, it’s no wonder so many buyers are keen to buy now if their finances allow it.
"All the same, there have been reassuring signs from the Bank of England that a rate rise is still some way off. When it finally happens, the Bank’s careful supervision of the economy means the base rate is only likely to rise gradually and should remain well below the 5% we were used to before the crisis.
"There is certainly no cause to panic if you need longer to plan your move or save for a deposit. Lenders will want to put your finances through some rigorous ‘stress tests’ to check you can cope with higher rates, so ask your broker to advise what level of repayments you can reasonably afford.”
