Gregory Pennington Reveals Popularity of Fixed-Rate Mortgages

Greater Manchester, United Kingdom, July 25, 2008 --(PR.com)-- Research by debt management company gregorypennington.com indicates that today’s homeowners are much more likely to opt for the security of fixed-rate mortgages, rather than variable.

In recent years, the percentage of homeowners choosing a fixed-rate mortgage has leaped from 47% to 76%, according to a survey conducted in July 2008. The survey revealed a stark contrast between two groups: those who took out a mortgage three or more years ago, and those who had taken out a mortgage in the last 12 months.

* 1st group (3 years ago or more): 47% chose fixed-rate mortgages; 42% variable.
* 2nd group (12 months ago or less): 76% chose fixed-rate mortgages; 9.1% variable.

“Normally, fixed-rate mortgages tend to be more popular when the Bank of England’s base rate is low, as people assume it’s likely to go up. Conversely, variable mortgages naturally become more attractive if the base rate is high and / or expected to come down,” commented a spokesperson for Gregory Pennington.

Under current market conditions, however, the base rate’s future direction is a topic of much discussion: “With the threat of inflation on one hand and the possibility of recession on the other, the BoE’s Monetary Policy Committee (MPC) finds itself in a tough spot. At their July meeting, they voted to keep the rate at 5%, a decision which met with some disapproval – just as any rise or reduction would have.”

Looking ahead, there’s no consensus on where the base rate will stand in 18, 12 or even 6 months: no-one knows how today’s economic problems will play out, so it’s not possible to predict the BoE’s reaction.

Homeowners’ decisions also depend on the perceived link between the BoE’s base rate and the mortgage rates actually charged by lenders: over the last 12 months, the base rate’s 0.75% descent has clearly not been matched by falling mortgage rates. “Uncertainty may be an inherent part of a variable deal, but this is only attractive in a ‘win some, lose some’ situation. Once people think they’ll suffer from the rises but not benefit from the cuts, a variable mortgage becomes much less tempting. Even though fixed-rate mortgages have also become more expensive in recent months, more and more homeowners are now opting for the security of a rate that won’t go up, no matter what happens.”

Many homeowners also feel pushed towards a fixed rate by factors beyond the mortgage market. “Like any market, the mortgage market doesn’t exist in isolation. In today’s uncertain times, with food and petrol going up and house prices going down, the concept of stability is particularly appealing.

“It’s easy to see why people are leaning towards mortgages that provide a degree of certainty – as a provider of free debt advice, we understand how important this continuity is to someone who’s struggling to plan their monthly budget. When we asked people what they look for in a mortgage, we found that respondents who’d mortgaged in the last year were almost twice as likely (as people in the ‘3 years or more’ group) to cite stability as a key criterion.”