New data from the Council of Mortgage Lenders (CML) shows that the appetite for short-term fixed rate deals is still strong among first-time buyers and home movers.
The survey revealed that 89% of first-time buyers and 73% of home movers took out a fixed rate loan, albeit mostly on a short-term basis, in May up from 88% and 72% respectively in April.
In addition, the mortgage survey also found worsening affordability continues to impact all home-buyers as well as existing borrowers. It does not take into account either of the 0.25% rate rises in May and July so it is inevitable that affordability pressures will become even more pronounced in the coming months.
Michael Coogan, CML director general, said: “For anyone wanting to get a foot on the property ladder or move house, each month affordability is becoming worse. The number of borrowers who are now paying stamp duty makes a difficult situation even worse despite the financial windfall to the treasury. This needs to be addressed urgently.
“Taking out short-term fixed rate mortgages may provide some reassurance, but eventually the loans will revert to a variable rate and the risk of a payment shock is real. Planning ahead for higher payments is as important as the initial decision to shelter from the risk of higher borrowing costs.”