More than 19 out of every 20 buyers seeking a mortgage applied for a fixed rate product last month, analysis of the latest mortgage lending statistics show.
Some 95.5% of new buyers are taking out fixed-rate mortgages, while the proportion of mortgaged homeowners who have fixed their rates is also at an all-time high, at 84.9%.
Savills analysis of FCA mortgage lending statistics.
Lawrence Bowles, director of research at Savills, commented: “Once more, our most recent buyer survey from late August shows that borrowers are increasingly looking to fix for a longer period. 13% of respondents looking to finance their next purchase with a mortgage stated a preference for a ten-year fixed rate deal. And indeed, the vast majority [56%] are looking to take out a five-year fixed rate.
“The move to lock into existing rates, which are still low in a historical context, will help to insulate the UK housing market from increasing interest rates in the short-term. Especially as we expect the Monetary Policy Committee to raise rates once again later this month.
“However, the average mortgage rate lenders are offering in August was 3.64% [75% loan-to-value, 2-year fixed rate]. That rate is the highest it has been since September 2012 [3.67%]. The average mortgage rate for someone who fixed in 2022 Q2 was far lower, 2.14%. With rates so much higher now, we expect to see transaction activity and price growth slow in the mainstream market in the coming months.
“While in the prime market, equity outweighs debt as a source of funding, and more affluent buyers are better insulated against increased costs of living. As a result, we expect activity to remain steady.