Last month over 10% of John Charcol borrowers opted to take out one of the most innovative products of the last decade, says Simon Collins Technical Manager at John Charcol:
“Borrowers have been reluctant to take longer term fixed rates when they know that variable rates are likely to remain low for the next couple of years at least.
"Yet at the same time they are anxious over longer term payment security, knowing that in 2 years time, fixed rates may well be significantly higher.
"The Hybrid is therefore the perfect product for those borrowers who want to take advantage of low variable rates now, while securing a fixed rate element at today’s historic low prices.
“The product is a longer term mortgage that is a blend of both tracker and fixed rates, and currently comprises a margin over the bank rate for the first two years of the mortgage, followed by a fixed rate for the final 3 years.
"Everyone knows that the bank rate will increase at some point, but the big question is when and how fast?”
More innovation needed
“The Hybrid is arguably the most innovative mortgage product we’ve seen in a good few years and so far is only offered in the intermediary market by Accord Mortgages.
"With the current stagnation in the housing market, and many high street lenders sticking obdurately to their traditional 2 year products because they have the lowest initial pay rates, it would be fantastic to see other lenders take up the mantle started by this novel product.
"It is ideal for First Time Buyers who want to take advantage of low pay rates now, but also have longer term security built in, and more widespread availability from lenders would almost certainly stimulate that end of the market.
"It really is the perfect product for the imperfect lending arena we continue to find ourselves in.”
Rates continue to rise
“Following on from the sharp increases in variable mortgage rates towards the end of 2011, this year we’ve already seen two to three rate increases, which would seem to be setting the trend going forward, and higher published pay rates are not likely to encourage new purchase business, nor borrowers sitting on historically low SVR’s to remortgage.
"It is ironic that one lender who has hiked the majority of their best rates by over 0.9% in just over four months, has this week claimed that 2011 saw the “most affordable” mortgage deals.
"Obviously not anymore.”
