Fixed rates get more popular

Countrywide has reported an increase in the proportion of mortgage applicants opting for fixed rate deals in February.

The UK’s largest mortgage broker, says that applications for tracker mortgages wavered for the first time since April 2009 with February witnessing a 4 % rise in applications for fixed rate mortgages compared to January 2010, representing 57% of all applications.

While the slight increase in fixed rate applications indicates that borrowers are nervous about the economic outlook, Countrywide reported a surge in total business, with the number of applications increasing 34% in February compared to January, a 6.6% increase on February 2009.

At the same time, the average interest rate charged on the most popular deals arranged through Countrywide fell by 0.26% in February to 4.52%. That represents a fall of 0.79% since last February.

And despite the fact that the number of higher loan-to-value deals increased in February, Countrywide found that the average deposit its customers put down actually increased to 22%- a 3% rise on January.

Grenville Turner, Countrywide’s group chief executive, says:

“It is encouraging to see the average interest rate of our most popular products fall as customers gather up larger deposits. This shows more commitment from major lenders to competitively price their products and provide the best rates for those with the biggest deposits.

“We may also be seeing a return of home movers entering the market as larger deposits typically come from home movers using the equity from their property to fund their move.

“As speculation mounts over house prices and inflation it is interesting to note that we’ve seen a marginal uplift in the volume of fixed mortgage applications.

"Tracker products have enjoyed a significant resurgence in popularity over the last nine months and now make up around half of all new mortgages, however the forthcoming election could unsettle the market and impact any economic recovery and customers are increasingly looking for the certainty of a fixed rate mortgage.”