Borrowers move away from fixed rate mortgages

The number of fixed rate mortgages taken out by borrowers fell in October, according to new figures published today (December 11th).

Homeowners are increasingly turning to variable rate products, the figures from the Council of Mortgage Lenders (CML) indicated, with fixed rate mortgages accounting for 68 per cent of total products taken out in October, compared to 72 per cent the previous month.

The CML statistics also indicated a further deterioration in mortgage affordability, a situation that was particularly acute for first time buyer mortgages, where homeowners had to contribute 20.6 per cent of their monthly income towards interest payments.

"Lenders have already responded to the credit squeeze by tightening lending criteria and increasing some loan costs," CML director-general Michael Coogan said. "And looking ahead, any uncertainty in the housing market may mean that borrowers are less willing to stretch themselves financially."

"However, overall, in the coming months we expect the lending figures to be driven more by supply factors rather than lower consumer demand," he added.

Earlier today the Abbey became the latest lender to announce it will reduce its mortgage rates in the wake of last week's interest rate cut, removing 0.25 per cent from its standard variable rate to leave it at 7.59 per cent from January 1st, 2008.

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