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Mortgage lending up, but millions miss out on low rates

By Martin Fagan - news@consumerchoices.co.uk

Mortgage lending is at a 25-month high, but millions are missing out on the cheapestrates by sticking with lenders’ SVR.

Mortgage lending rose to £13.4 billion in August, a 6% rise from £12.6 billion in July and a 10% increase from £12.1 billion in August 2010, according to figures released by the Council of Mortgage Lenders (CML).

This is the highest monthly total since July 2009 (£14 billion) and the highest monthly total for the month of August since 2008 (£19.3 billion). The CML said that activity levels continue to be “subdued but broadly stable”.

Despite the volume of mortgage lending being at a 25-month high, separate research shows that many borrowers have not taken advantage of the fact the Bank of England base rate has been at 0.5% for 31 months by remortgaging to a cheaper deal.

According to the professional advice website unbiased.co.uk, 46% of homeowners haven't reviewed their mortgage since March 2009, when the Bank of England rate fell to 0.5%. unbiased.co.uk says the growing number of ‘interest rate-spoilt' borrowers means homeowners may be missing out on the lowest fixed-rate deals on the market “in decades”.

With fixed rates falling below 5% for the first time in 24 years and the threat of future interest rate rises becoming more real, homeowners are potentially missing out on the best fixed-rate deals, but many are unrealistic about the deals on offer.

According to unbiased.co.uk, the last 24 years have never seen five-year fixed rates lower than 4.99%, but these are now available. However, when it comes to fixing, the rate homeowners would be prepared to fix at is an unrealistic 3.4%.

“The low base rate has had a dramatic effect on homeowners' rate expectations, with our research showing a stark contrast between what consumers would be willing to fix their mortgage at and the average rate available,” said Karen Barrett, chief executive of unbiased.co.uk.

"With the base rate now remaining at a record low of 0.5% for 31 months, our research shows homeowners could be missing out on some record fixed-rate deals.

“Once base rates begin to increase, so will the price of fixed rates, meaning that now could well be the perfect time to review their mortgage finances and move to guard against the potential of increased payments in the future.”