Shorter-term fixed rate mortgages have increased in popularity, with more homeowners opting for two-year fixed rate products, according to Paragon’s latest Financial Adviser Confidence Tracking (FACT) Index, based on interviews with 201 mortgage intermediaries.
Two-year fixed rate mortgages accounted for 39% of mortgage business introduced in Q3 2019, up from 37% recorded in Q2.
Whilst fixed periods of five years or more remain the most popular, the proportion of mortgage customers opting for a long-term fix fell from 51% in Q2 to 46% this time round.
Unsurprisingly, fixed rate mortgages (89%) were still the overwhelming preference over tracker rate mortgages (9%). But with an election looming and lack of clarity around the Brexit situation, homeowners are perhaps looking to shorter-term fixes to gain greater flexibility to reassess when things settle down.
This view is endorsed by the response to a new question in the Q3 2019 survey, seeking to understand the biggest impact of current uncertainty when it comes to intermediaries meeting their clients’ needs.
More demand for five-year fixed rate mortgages led the way (39%) as homeowners continue to favour longer-term stability. However, 35% – a significant number of respondents – reported more demand for two-year fixes.
John Heron, pictured, Director of Mortgages at Paragon, said:
“Five-year fixes started to overtake two-year deals at the end of 2017 and have been growing in popularity since, driven by historic low rates, tax hikes for owning additional homes and political uncertainty.
“As the UK heads into a general election, it’s interesting to see an increase in the proportion of homeowners looking for shorter to mid-term products as a way to retain stability but allow themselves the opportunity to reassess in two-years’ time, when the Brexit situation and its impact on the economy and the housing market is clearer.”