Second-time buyers are leading a shift towards longer-term fixed-rate mortgage deals according to new data from Moneyfacts, as borrowers seek greater financial stability amid continued uncertainty over the future direction of interest rates.
Analysis of consumer activity on moneyfactscompare.co.uk found that 58% of second-time buyers who compared mortgage products between 1 and 30 September opted to look at fixed terms of three years or longer.
By contrast, only around a third of those remortgaging (34%) and first-time buyers (31%) explored deals beyond the traditional two-year fix.
Despite this, shorter-term deals remain the most popular overall, with 55% of all consumers comparing fixed-rate mortgages of two years or less.
RATE PROTECTION
The data suggests that while many borrowers remain hopeful that rates could ease over the coming year, a significant share of homeowners – particularly those trading up – are prioritising protection from potential volatility.
The Moneyfacts Analyser data also highlights a growing divergence between buyer groups.
Whereas first-time buyers remain largely focused on shorter fixes to retain flexibility, second-time buyers appear more inclined to lock in for longer to manage larger mortgage exposures and guard against unexpected market shifts.
PREDICTABILITY
Adam French, Head of News at Moneyfactscompare.co.uk, says: “Many second-time buyers may be making peace of mind a priority by seeking longer term mortgage deals despite the general expectation for rates to keep slowly falling in the short-to-medium term.
“Instead, they are prizing stability, predictability and protection from volatility – particularly if they have borrowed more and increased their exposure to unforeseen rate rises.”
FINANCIAL STABILITY
Mary-Lou Press, NAEA Propertymark President, adds: “Considering the fluctuations in base rates over the years, the rise in the cost of living and the current volatility in the economy in general, it is understandable as to why many second-time buyers who are searching for financial stability are opting for longer fixed-term mortgages to better manage their outgoings from any sudden increases in interest rates.
“However, considering 2-year fixed-rate mortgages are also proving to be popular currently, it is also equally understandable that many people are hoping that the base rates will eventually fall further and will therefore result in more affordable mortgage products in the medium to long term.”
