Borrowers turn to variable-rate mortgages

The Council of Mortgage Lenders (CML) has reported that more people are choosing variable rate mortgages in anticipation of further cuts to the base rate of interest.

A total of 68 per cent of new loans had variable rates in October, down on the 72 per cent figure recorded in September.

It is thought that many borrowers were expecting at least one rate cut at the time and now it seems that more are to follow after December's cut.

Total loans increased by nine per cent month-on-month and annually, but the CML is convinced that the figures are set to turn negative in the months ahead.

"October is the last month we expect lending volumes to be higher than a year ago as lenders and borrowers will behave more cautiously in an uncertain and slowing market environment," said Michael Coogan, director general of the CML.

"For those customers coming to the end of their fixed-rate mortgage in 2008, the potential impact of higher monthly payments will be diminished by the fall in bank rate this month and other rate reductions to come early in the New Year," he added.

The Bank of England cut the base rate from 5.75 per cent to 5.5 per cent in December.

Related Articles