Mortgageforce sees consumer attitude shift to long term

The national mortgage broker said over half of fixed rates taken out in May were for three years or longer, taking the place of the traditionally popular two-year fixed rate.

Katie Tucker, technical manager for Mortgageforce, said: "Two-year fixes were always the favourite, or trackers when Bank rate is widely expected to fall, but this rush to commit to long term shows that consumer attitude has turned a corner.

"Borrowers who have been weighing up the chances of lenders realistically cutting rates any further, versus the chance of bank rate being increased in the next few years, the equity left in their properties, and even their job security, are choosing to commit now."

Ms Tucker said that it was not even the case that the longer-term products were cheaper than the usual two-year fixed rates showing that borrowers are choosing to pay marginally more for a recession buffer that will tide them over for as long as possible.

She said: "Even borrowers benefiting from their lenders' very low standard variable rates are choosing to switch to a fixed rate now that will keep their payments low and give better value if the variable alternatives start to increase."

According to Mortgageforce, the most popular lenders include Abbey which has a three-year fixed at 4.14 per cent available up to 70 per cent loan-to-value, and Alliance & Leicester which has a five-year deal at 4.79 per cent with a £995 fee and refund of valuation, available up to 75 per cent LTV.

Ms Tucker said: "We have also seen more 10-year fixed rates being taken this month than ever before, as prices are so historically competitive. The initial consultation with most brokers is free so I strongly recommend borrowers at least get a quote of what they could sign up for now."

Adrian Kidd, adviser for London-based IFA Unleash Advice Partnership, said: "I am actually looking at trackers also that have a cap to provide that protection also but if you can get a fixed for five years at close to 4 per cent then people should sign on that one.

"Lenders could be ultra competitive on 10-year deals if they wanted to. This would get business moving and help revive the market somewhat. Again, 10-year money at 3.99 per cent would be fantastic and the lenders who can use savers' monies to fund these deals would make a killing. Still, not one lender seems to want to take the market by the scruff of the neck and start things off.

"Brokers who are still making 80 to 90 per cent recommendations on two-year deals are not servicing their clients well enough as they only care about the remortgage in two-years' time instead of long-term value to the client."