More borrowers choosing five-year mortgage deals

September 12, 2017 by Brendan

Borrowers

An increased number of homeowners are opting for five-year mortgage deals rather than shorter term fixed rates, according to a study by conveyancing management service LMS.

The research found that 98% of respondents believe that interest rates will either increase or remain static during the coming year. A lower number of homeowners switched to a new deal to reduce their mortgage repayments in July – just 15% in comparison to June’s figure of 21%. The number of homeowners who increased the overall size of their mortgage also fell, reducing to 15% from 19% in May.

In July, more than a third of borrowers switched to five-year fixed rate deal, which is the largest number since the data was first collected. The figure, 37%, was also a huge increase on the previous figure of 7% of homeowners signing up for a five-year deal.

The survey shows that more people remortgaged in July, with an increase of 12%. This is thought to be due to improved affordability during June. The average annual repayment fell during June, from £8,197 to £8,080.

According to the LMS chief executive Andy Knee, consumers are changing behaviour when it comes to remortgaging. Over the last 12 months, homeowners have typically remortgaged to borrow more money or reduce monthly repayments. However, people are now switching to longer term deals to gain financial security, says Knee.

Mortgage advisors gain knowledge of various types of mortgage, including fixed rate deals, by attending CeMAP training courses to gain a professional qualification, then help homeowners to find the most suitable deal.