Source: FT Adviser —
Fixed rate mortgages have begun to fall after reaching 6 per cent last year, but remain relatively high, but with the prospect of falling interest rates, some are questioning whether borrowers may revert to tracker mortgages.
When compared to January 2021, the average two-year fixed rate has more than doubled from 2.52 per cent to 5.79 per cent, according to Moneyfacts.
Tracker mortgages, meanwhile, have become more popular. Accord Mortgages, for example, launched a new range in December, responding to what it described as increasing demand for variable rate mortgages.
“Whereas fixed rates have typically represented 95 per cent of our mortgage business, the split has shifted over recent months. Since October 2022, on average 12 per cent of our new lending has been on tracker products,” says Jeremy Duncombe, managing director of Accord Mortgages.
“As rates have stabilised, we have seen fixed rate popularity start to increase again, but tracker popularity is still above what we saw earlier last year.
“We anticipate that this picture is likely to continue for as long as a degree of uncertainty remains, and until borrowers feel that rates have levelled out to what they might consider to be a ‘new normal’.”
But how much can we expect rates to fall?
Average rates
Although lenders such as Accord and NatWest have cut rates this month, some in the mortgage industry predict that higher rates should be considered the norm.
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