An increasing number of homebuyers are opting for fixed rate mortgages amid fears that the Bank of England will raise interest rates later this week.
Data from prominent lender The Yorkshire Building Society suggests that the ratio of fixed rate to variable rate mortgage applications has almost doubled in the past two months.
In August, the ratio of fixed rate to variable rate applications received by the lender was 35:1. In October, this rose to 64:1.
The news comes ahead of concerns that an interest rate rise will be on the agenda at the Bank of England’s upcoming Monetary Policy Committee (MPC) meeting, which is due to take place on Thursday 2 November.
Back in September, Bank of England Governor Mark Carney told the BBC that an interest rate rise in the “relatively near term” was very likely – leading many to suspect that the MPC meeting will raise the Bank’s base rate from its current record low of 0.25 per cent to 0.5 per cent on Thursday.
The change, which would mark the first interest rate hike in many years, might be bad news for anyone with a standard variable rate (SVR) mortgage – who may see their monthly payments increase in line with the base rate.
Simon Broadley, Senior Manager at The Yorkshire Building Society, has said that borrowers are already turning towards fixed rate deals in a bid to counter the uncertainty.
This is despite the fact that the lender is currently offering attractive SVR deals with interest rates as low as 0.87 per cent.
“With increasing speculation that the Bank of England could trigger a rate rise this week, our data indicates borrowers are keen to secure a deal before any potential increase,” he said.
“Despite having the lowest ever variable rate mortgage on the market, our findings demonstrate that borrowers value being able to lock-in to a fixed rate deal and know that their monthly payments won’t change during their initial term.”