Peace of mind is still valued by clients

The strength of the modern mortgage market was underlined with the Council of Mortgage Lender\'s publication of lending figures for February. Although showing a drop of 7% on January\'s figures, the 24.6bn still represented a record February and was up by 9% on the same month last year.

In fact, the CML points out that the talk of higher interest rates seems to have had little impact on those people looking for new homes or remortgages and it is sticking with its 360bn forecast for 2007.

Of course, there have been concerns about the impact of rising interest rates on levels of mortgage borrowing. Other statistics from the CML, this time relating to January, show that large numbers of borrowers are opting for fixed rate loans.

Looking at the first-time buyer sector, 85% of all first-time buyers and 70% of home movers chose fixed rate products with these deals accounting for 72% of new mortgages. These encouraging figures show that borrowers are receiving some good advice to help them in selecting the right types of mortgages.

Consumer interest in fixed rates will fluctuate depending on the comparative cost of fixes relative to variable deals.

The CML’s data points to a favourable costing for fixed rate over discounted rates although these numbers relate to the mortgage business completed, as opposed to originated, in January.

January’s surprise rise in the base rate led to higher swap rates and therefore a bumping up of the fixed rate deals on offer. It will be interesting to see how the proportion of fixed rate take-up will be affected by the increase in the cost of these deals. Hopefully, borrowers will understand that the security of a fix is something that can serve them well in an uncertain economic environment.

While we may not have seen borrowers following Professor David Miles’ recommendation and taking up long-term fixed rates in their droves, this does suggest that peace of mind is a valued commodity. This is particularly true in the sub-prime sector, where those that have experienced credit difficulties are well served by locking into a rate for two or three years.

The products on offer in the sub-prime arena allow that to happen, giving shelter to borrowers without extended lock-ins. This is ideal when it comes to providing a credit repair solution and providing manageable mortgage payments for a time to enable borrowers to get back on track.

Once clean credit records have been built up, brokers are in a position to complete a re-entry to the mainstream so borrowers can take advantage of lower rates.