Recently, Abbey conducted a study to discover homeowners' feelings on fixed rate mortgages, and their findings are rather surprising. Despite rumors that the Bank of England will be reducing interest rates in the coming months, approximately one third of the respondents said that they will look for a fixed rate mortgage when they are ready to buy a new home or to remortgage.
Nici Audhlam-Gardiner, head of Abbey mortgages, says that, "For most of us, our mortgage is the biggest financial commitment we make, so it's understandable that we want to know just how much we're going to have to fork out each month." It seems that for that very reason, many borrowers and potential borrowers are planning on choosing the security of a fixed rate mortgage over the other options available.
According to the study, 14 per cent of those who would choose a fixed rate mortgage said that they would opt for a 5 year fixed rate, 6 per cent said they'd go for a 10 year fixed rate, and another 9 per cent said that they'd want to find a 15 year fixed rate mortgage.
It's rare in a study to find that the desire for a longer term fixed rate loan is greater than for a shorter term loan. Audhlam-Gardiner justifies this finding by saying that, "You never know what's going to happen in the future, but at least if you've committed to a long term fixed deal, you know where you are going to stand with your repayments."
Of those who responded to the study, 65 per cent said that regardless of the Bank of England's base rate, they'd prefer to know what their payments are with a fixed rate loan instead of having that uncertainty looming as they would with a variable or tracker mortgage. Aside from the payment uncertainty, other reasons for borrowers' desire for fixed rate loans include predictions of interest rate increases in the future, as well as general confusion about how tracker mortgages work and how a tracker mortgage could benefit them.