Rate cuts encourage 94% of homebuyers to fix

The proportion of homebuyers opting for fixed rates grew to 94% in October, from 92% in September, despite reports that the Bank of England base rate may remain at 0.5% until after the general election. 

This behaviour is likely to have been influenced by improved pricing from lenders, with data from Moneyfacts.co.uk showing the average two year fixed rate fell by 27 basis points (bps) to 3.51% in October, having been 3.78% in September. 

Even so, price cuts also brought down the average two year tracker rate by 12bps from 2.63% to 2.51: exceeding the drop of 8bps for five year fixed rates (from 4.16% to 4.08%) and 4bps for three year fixed rates (from 3.71% to 3.67%).

The preference for fixed rates among remortgaging homeowners held firm at 89% for a second month. 

Brian Murphy, head of lending at Mortgage Advice Bureau, comments:

“The potential delay on a base rate rise has prompted a dip in mortgage pricing across the board, and there is a good chance that rates and product choices will continue to improve as mortgage lenders look to end the year on a positive note.

The months ahead will be a crucial window for new and existing borrowers to judge how and when to make their move. The fall in the average purchase LTV over the last year makes the presence of affordable schemes like Help to Buy, shared equity and shared ownership even more important. Policies to support house building and homeownership are sure to be a dominant theme of the upcoming election