We reported last month on how attitudes towards fixed rate home owner loans and mortgages have changed over the course of recent months. Whereas at the beginning of the year, the majority of new loans were taken out on a fixed rate basis due to the belief from many borrowers that interest rates would rise sharply in the near future, the number of fixed rate loan deals has dropped significantly in favour of variable, discounted and tracker rate loan deals.

According to the latest figures from the home owner loan and mortgage broker, John Charcoal, fixed rate loans accounted for just 26.3 per cent of the overall home owner loan market during the month of October, compared with 83.1 per cent in June this year.

The main reason for this change in attitudes from borrowers is due largely to the particularly high cost of fixed rate loan deals at the moment, compared with tracker and discounted deals, which can often work out considerably cheaper over a term. The other main factor is that it now seems unlikely that the Bank of England will increase interest rates for some time and therefore borrowers are less worried about their loan repayments increasing.

Drew Wotherspoon of John Charcoal commented on the change, he said “The roller coaster movement in product choice reflects the rapid change in mortgage pricing and interest rate sentiment over the last year. With the outlook for interest rates little changed over the last month an even higher proportion of borrowers chose a variable rate mortgage, in most cases a tracker. There seems a good prospect that borrowers on a variable rate will be able to benefit from rates more than 2 per cent lower for the time being and then switch to a similarly priced fixed rate later.”