Record numbers of buyers locking in 'low' mortgage rates

Record numbers of buyers have taken out fixed rate mortgages to lock-in lower priced home loans before rates rise further, analysis of official data shows.

The latest Mortgage Lending and Administration Return data from the Financial Conduct Authority (FCA) shows that 95.5% of home loans were on fixed rates during the second quarter of 2022.
That is up from 94% in both the fourth quarter of 2021 and first three months of this year.

Analysis by Savills found that this is the highest proportion than ever before.

It comes amid expectations of further interest rate rises from the Bank of England later this month to combat rising inflation, which in turn could see mortgage lenders increase their product pricing.

Lawrence Bowles, director of research at Savills, said: “More home buyers are taking out mortgages with fixed rates than ever before, according to an analysis of the latest mortgage lending statistics. 

“The vast majority 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%.”

He highlighted separate research from Savills that shows borrowers are increasingly looking to fix for a longer period, with 13% of buyers looking to finance their next purchase with a 10-year fixed rate mortgage and 56% seeking a five-year fix.

Bowles added: “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% on a 75% loan-to-value two-year fixed rate.

“That rate is the highest it has been since September 2012. 

“The average mortgage rate for someone who fixed in the second quarter of 2022 was far lower at 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.”