The vast majority of home buyers have opted for a fixed rate mortgage instead of a variable rate one, according to the latest figures released for February 2014. The National Mortgage Index from the Mortgage Advice Bureau has been released and it indicates over 95% of those who bought a home during February chose the fixed rate options. The huge percentage tops the 94% of people who did the same in January this year. The housing market is still looking up Overall the figures look more encouraging than they did last year. A third more applications for mortgages were made in February when compared to January, and nearly two thirds more when compared to February 2013. However it is clear the rush for fixed rate mortgages doesnt seem to be stopping anytime soon. The threat of an interest rate rise looms large One of the main reasons why the fixed rate mortgage has become so popular is the potential for the Bank of England to raise interest rates in the near future. Just a month or so ago this was thought to be a major threat, and many home owners were advised to secure the best fixed rate mortgage they could find. Fixed rate deals usually last for two, three or five years, giving new home owners or those who are re-mortgaging the chance to enjoy guaranteed payments for their chosen period of time. However inflation was seen to fall in February and this is thought to provide some breathing space for the Bank of England to hold back on raising interest rates. While nothing is certain it is thought the BoE could hold back on raising rates until at least the end of this year, and possibly not until 2015. This could mean some people have locked into deals that involve them paying higher interest rates than they would have had with a variable rate deal. Tracker deals are unpopular at present It should come as no surprise therefore to learn that tracker deals are not popular among buyers at the moment. Even though the rates for tracker mortgages are very appealing, few buyers are tempted to take them out. This is because interest rates are clearly coming to the stage where they will start to rise. Average tracker rate mortgages were measured at 2.82% during February a drop of 0.6%. Even this drop was not enough to sway buyers to move away from the much more popular fixed rate deals. Clearly the mortgage market is still hinging very much on the future of interest rates. While things seem to be more settled this month as opposed to last month, thanks to the drop in inflation, people are still cautious. Buyers do not want to get caught out with a significant rise in rates that will put pounds onto their monthly mortgage payments. One wonders whether the monthly take up of fixed rate mortgages will increase still further in the months to come.
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