Borrowers confused about mortgage choice

Two-fifths of all homeowners would be confused about whether to opt for a fixed or tracker-rate mortgage if they were choosing a new deal tomorrow.

Increased uncertainty among homeowners after a closely divided vote at the last Bank Base Rate decision is not surprising. In its monthly study of nearly 700 mortgagees, Abbey’s Remortgage Index found that in July, 41% were unsure which type of mortgage they would opt for compared with just 30% in June.

Fixed-rate mortgages are still the most popular type of deal - with 47% opting for the security that they provide. Of that figure, 6% of homeowners would opt for a two-year fix if they were to remortgage tomorrow, compared with 7% last month and 8% the month before.

Three-year fixes remain the most popular option with more than one-in-five saying they’d choose this if they were remortgaging tomorrow. Five-year fixes have reduced slightly in popularity for the third consecutive month, with 22% opting for this product, compared to 27% last month and 30% in May 2008, while demand for longer-term fixes continues to increase.

One in 10 stated that they would opt for either a two-year or flexible tracker if they were to remortgage tomorrow - up from 8% in June and 7% in May 2008.

Phil Cliff, director of Abbey Mortgages, said: “The current uncertainty surrounding Bank Base Rate decisions and the general uncertainties on the market at the moment are clearly feeding through into consumers views on mortgages. However, in times of uncertainty, people want security and nearly half of all borrowers saying they’d choose to fix if they remortgaged tomorrow, with most choosing a three-year deal.”