Nearly a third of new homebuyers researched variable or tracker products in July, up from fewer than one in 10 in February
Almost one in three first-time buyers were weighing variable or tracker mortgages in July, as rising fixed rates prompt prospective homeowners to reconsider how they finance a purchase, according to new analysis from price comparision webiste Moneyfactscompare.co.uk.
The data shows that 31.3% of first-time buyers researching mortgages on the comparison site in July were looking at variable or tracker products, up sharply from 9.5% in February. The proportion had held below 10% throughout spring before accelerating alongside increases in fixed mortgage rates.
The Moneyfacts average new 90% loan-to-value (LTV) two-year fixed rate rose from 5.09% in February to 5.74% in July. For a borrower taking out £200,000 over a 25-year term, that translates to monthly repayments of around £1,257, compared with approximately £1,180 in February — an increase of roughly £924 per year, even after rates pulled back from an April peak.
By contrast, the average new two-year 90% LTV tracker rate stood at 4.80% in July, producing monthly repayments of around £1,146 on the same loan. That represents a saving of approximately £111 per month, or more than £1,300 annually, against the equivalent fixed-rate product.
| Two-year fix (90% LTV) | Two-year tracker (90% LTV) | |||
|---|---|---|---|---|
| Avg rate | Cost | Avg rate | Cost | |
| February | 5.09% | £1,180 | 4.77% | £1,143 |
| July | 5.74% | £1,257 | 4.80% | £1,146 |
| Difference | +65bps | +£77 per month | +3bps | +£3 per month |
| Source: Moneyfactscompare.co.uk | ||||
"The big jump in first-time buyers researching tracker mortgages reveals the pressure higher fixed rates are putting on the budgets of hopeful homebuyers," said Adam French (pictured right), head of consumer finance at Moneyfacts. "For many borrowers, saving more than £100 a month compared with a fixed-rate deal could make the difference between being able to buy a home or delaying their plans.
According to French, tracker mortgages currently look attractive because they are priced at around one percentage point above the base rate, making them cheaper than equivalent fixed-rate products. However, he cautioned that borrowers should not assume today's monthly payment would remain stable.
"Money markets are currently pricing in a couple of Base Rate hikes over the coming months," French pointed out. "If those expectations prove correct, tracker mortgage repayments will rise too.
"Recent years have also shown how our volatile times can quickly move the outlook for interest rates, so anyone considering a variable mortgage needs to ensure they have enough room in their budget to cope with higher monthly repayments.
"While some borrowers may be prepared to accept that uncertainty in return for lower initial costs, others will value the security of knowing exactly what they'll pay each month. The right choice ultimately depends on individual circumstances, but anyone stretching themselves to get onto the property ladder should carefully consider whether they can still afford their mortgage payments if interest rates move higher."
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