Only Finance.com - Fixed-rate mortgages

Mortgages - Fixed-rate mortgages

John Charcol, a UK mortgage broker, has announced that the number of fixed rate mortgages - a mortgage that has a fixed interest rate, despite changes made by the Bank of England’s, Monetary Policy Committee (MPC) - has risen between, March and April 2008. The amount of fixed rate mortgages, has increased by 64 per cent, in the space of a month. This is due to their cost being lower than the tracker rate mortgages - a mortgage, that charges an interest rate, which changes, corresponding to the MPC interest rate levels.

The presence of first time buyers in the market fell in April, with people making new applications for mortgages, now making up only four per cent of the market, compared to seven per cent in March and less than, half of last year’s average of 10 per cent.

Kate Tucker, technical manager at John Charcol, spoke about the increase in fixed-rate mortgage products, stated that their costs were between a quarter to a half per cent lower than tracker-rate mortgage product.

Tucker said: “Not only has mortgage choice been all but eradicated above 90 per cent loan-to-value, but the biggest lenders are charging interest rates around three quarters of a percent higher for borrowers who aren’t supporting the purchase with at least a 25 per cent deposit.

She also added: “This means that a £150,000 mortgage costs around £93 more in interest every month for someone using only a 10 per cent deposit, compared to a borrower taking £150,000 mortgage with a 25 per cent deposit.”

The mortgage broker organisation had also recorded a fall in demand for buy-to-let mortgages in April, with this kind of mortgage accounting for 2.5 per cent of total mortgage applications. Tucker attributed this to lenders increasing the size of deposits required from 10 per cent to 15 per cent and in some cases, 25 per cent, as well as an increase in the rental income.

Tucker also added: “Where a keen selection of lenders asked that rent covered 100 per cent of the monthly interest payment throughout over the last six months; rental cover requirements in some cases, have reverted back to the likes of 125 per cent. Other big players in the buy-to-let market including Mortgage Express, have increased their rent requirements from 110 per cent of mortgage payment, to 120 per cent and 1st National are now asking rent to cover at least 120 per cent of the mortgage, not 110 per cent.”