More large loan borrowers choosing fixed rates
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A quarter of large loan borrowers chose a fixed rate mortgage in the final quarter of 2011, up from a fifth at the start of the year, according to Knight Frank Finance’s latest Large Loan Index.
Knight Frank Finance says that while borrowers taking out loans of £500,000 or more are still taking advantage of low variable rates, growing numbers are starting to fix due to both the competitive rates on offer and the desire for security.
The average variable rate deal was 2.70% in Q4 2011, while the average fixed rate was 3.70%, and the average LTV was broadly stable at 60%.
The Index notes that there has been a gradual decline in the number of borrowers choosing interest-only mortgages in recent quarters.
Simon Gammon, managing partner at Knight Frank Finance, says: “The move to repayment mortgages is the result of tighter criteria from lenders.
“That said, those who are borrowing are recognising the opportunity that low interest rates represent and seeking to reduce the amount of their loan. This is highly advisable as higher rates will return and those borrowers that are betting on permanently low rates will be caught out when the Bank of England revisits higher interest rates.”
He adds that his firm has also noticed that banks are being more flexible about the types of assets they are willing to accept as additional security against large loans, and therefore fewer borrowers are putting down large equity deposits.
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