Increased Five-year Fix Uptake could be a Money Saving Move for Borrowers
Brokers are helping more clients make their money work harder by fixing their mortgage over a longer term, which has seen an increasing demand for five-year fixes.
During 2017 Accord saw appetite for five-year fixes grow, most significantly amongst remortgagers with applications increasing by 30% in December compared to January 2017.
November saw the biggest month-on-month increase in five-year fix remortgage applications by 10% , perhaps prompted by the Bank Rate announcement in November and subsequent rate rise. This trend continued into December with two in five remortgage customers applying for a five-year deal.
House buyers were also keen to lock in to a good rate for longer, with Accord seeing an 11% uplift in applications for five-year home purchase loans in December compared to January 2017.
David Robinson, National Intermediary Sales Manager at Accord, said:
"Due to the competitiveness of five-year deals at the moment borrowers feel they will save more money in the long run by plumping for a longer term fix.
"For instance, there is currently a 0.15% rate difference between a market average two-year fix at both 60% and 65% loan-to-value (LTV) at a rate of 1.73% and Accord’s 1.88% five-year remortgage deal at the same LTV.
"The changing economic, social and political landscape over the past year may have made borrowers nervous.
"However, our figures show that brokers have navigated clients through the challenges by advising that securing a competitive rate for longer is best for them.
"In the run up to the Bank Rate rise borrowers opted for a five-year fix. Given that’s just a taste of where rates are expected to go, it’s clear borrowers crave the assurance of knowing exactly how much their monthly repayments will be over the next 60 months, which must be a comfort given changeable external factors influencing interest rate flux."