Mortgage holders looking for security

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Thursday 27th September 2007

Figures from Abbey show consumers are looking to increase the level of financial security derived from their mortgages in light of the recent credit crunch.

In a recent survey conducted by the financial services provider, 79 per cent of homeowners stated that they would obtain a fixed-rate mortgage in order to ensure their monthly repayments could not rise further.

This comes in spite of the fact that the current base rate of 5.75 per cent is the highest since March 2001.

Less than a fifth (18 per cent) expressed a preference for a tracker mortgage - despite the fact that their repayments on such a deal could decrease if the base rate falls in the coming months.

"Fixed rates have always been popular in times of uncertainty when people look to gather as much security as they can from their mortgage," comments director of mortgages Sue Hayes.

The news follows the publication of figures by the Royal Institution of Chartered Surveyors (Rics) which identified a 32 per cent rise in house auctions in the second quarter of 2007.

Many of these could be ascribed to homeowners being unable to afford their mortgage repayments and being forced to sell their property at short notice, according to Rics.

Oliver Gilmartin, economist for the institution, predicted: "We continue to expect a rise in the number of homes going under the hammer into 2008."

Subsequent data unveiled by the organisation this month showed that the housing market is 350 per cent harder to access than in 1996, with conditions likely to worsen further as lenders become less willing to take sub-prime customers.

"First-time buyers are facing an enormous struggle to access the housing market," observes senior economist David Stubbs.

"This may worsen if the turmoil in the US market forces mortgage providers to tighten lending criteria and demand even higher deposits."

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