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Mortgage uncertainty ahead of MPC decision

Wednesday, 6 August 2008 12:00 AM

Some two fifths of UK homebuyers would be unsure whether to choose a fixed-rate of tracker mortgage ahead of the Bank of England's interest rate decision.

Expected tomorrow the Bank's monetary policy committee will make a decision on the future direction of interest rates in the UK - with the most likely outcome a hold on the base rate.

But in the meantime, borrowers are struggling to make a decision over which is the best deal for then, argues Abbey.

"The current uncertainty surrounding base rate decisions and the general uncertainties on the market at the moment are clearly feeding through into consumers views on mortgages," explains Phil Cliff, director of Abbey Mortgages.

"However, in times of uncertainty, people want security and nearly half of all borrowers saying they'd choose to fix if they remortgaged tomorrow, most choosing a three-year deal."

Abbey recently superseded Halifax as the UK's largest mortgage provider.

Fixed-rate mortgage deals are still the most popular - with 47 per cent of borrowers opting for the security they provide during July.

Of that figure, six per cent of homeowners would opt for a two-year fix if they were to remortgage tomorrow, compared with seven per cent last month and eight per cent the month before.

Three-year fixes remain the most popular option with more than one-in-five Abbey customers saying they'd choose this type of deal if they were remortgaging tomorrow.

Five-year fixes have reduced slightly in popularity for the third consecutive month, with 22 per cent opting for this product, compared to 27 per cent last month and 30 per cent in May 2008.

However, demand for longer-term fixes continues to increase. Six per cent of respondents opted for a ten-year fix, compared with five per cent last month and just three per cent in May.

Chris O'Toole

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