Yorkshire Building Society has reported a rise in longer-term fixed rate mortgages following the Bank of England’s base rate rise last month.
Since the Monetary Policy Committee chose to increase the Bank Rate by 0.25 per cent to 0.75 per cent at the beginning of August, Yorkshire said it has seen a 13 per cent increase in the number of borrowers applying for a five-year fixed rate mortgage.
Janice Barber, mortgage manager at Yorkshire Building Society, said the lender’s five and ten-year fixed products proved popular as people look for more stability.
She said: "The demand for longer-term fixes also suggests mortgage holders expect interest rates to continue rising, and that by reviewing their accounts now believe they may be able to get a better deal while rates are low."
David Hollingworth, associate director of communications at London & Country, said the market saw the same behaviour of locking into longer-term rates even before the rise, so this behaviour was to be expected.
He said: "Certainly, more people are thinking towards mid and long-term security with the market shifting away from the traditional two-year products towards the now more popular five-year options.
"I think as long as borrowers understand they are locking in for that period of time and there will be penalties if they do want to exit early, then the rates are attractive and offer a level of security."
Earlier this week, Moneyfacts reported that Yorkshire Building Society was the only lender to announce it would not be increasing its standard variable rate in light of the rate rise.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, said at the time providers had been slower to react to the change compared with last year’s rise when the full 0.25 per cent was reflected in the average two-year tracker just 16 days later.
Moneyfacts reported the average standard variable rate had risen from 4.72 per cent on 1 August to 4.84 per cent on 3 September, with the average two-year tracker rate rising from 1.95 per cent to 2.17 per cent.
Ms Nelson said in the two-year fixed rate mortgage market, the average rate had remained the same over the course of the month with many providers having already priced in the rate rise in the lead up to the announcement.
She said: "Lenders have held off from increasing rates further in a bid to attract these borrowers who are now considering remortgaging away from their standard variable rate."
Ms Nelson added: "The ball is now rolling for base rate rises, with at least a quarter-point rise expected in the foreseeable future - borrowers now should not rest on their laurels and should opt for a fixed deal to protect themselves against any future rate rises."