A record level of borrowers opted for variable mortgages in July, figures from Mortgages Direct show.
In the month where market commentators were divided on whether the Bank of England would increase the base rate, nearly 30% of borrowers opted for variable mortgages in June compared to 26% in May. The number of borrowers choosing variable mortgages was four times higher than those recorded this time last year.
Prior to the base rate hike, tracker mortgages were very competitive as the rate had remained static for twelve months. In contrast, fixed rate mortgages had been going up in price, as lenders factored in an increase in their fixed rates, in anticipation of the rise.
Peter Gladdy, director of Mortgages Direct, says: With record numbers of borrowers opting for variable mortgages, many homeowners will obviously be very concerned about the latest base rate rise. However, variable mortgages are still competitive compared to fixed rate deals.
“Although, any further rise in interest rates will certainly pose a serious problem for many homeowners. Many borrowers went for variable mortgages, prior to the Bank of Englands decision last week, with the understanding that rates will only increase by 0.25% for the foreseeable future. It will be interesting to see how popular variable mortgages remain, now that the rates have increased and may increase still further.