Borrowers abandon one year rates

Borrowers are less likely to pick one-year fixed mortgages ahead of expected rate increases, with three-year deals becoming more popular, according to a new survey. 

Tony Alexander's latest monthly survey of the mortgage adviser market reveals a sharp decline in borrowers choosing a one year mortgage.

Only 3% of advisers said one year terms were the most favoured among their clients. In contrast in January, 89% of advisers said one year terms were the most popular. In April, that figure was 39%. 

The appetite for two year loans has remained broadly flat in recent months according to Alexander's survey. 

Three year mortgages are rapidly becoming the most favoured term for clients, the study found. 

A total of 57% of advisers said their clients favoured three year deals the most. 

Alexander's survey for September was mostly recorded before the recent lockdowns.

It found that a net 16% of advisers reported seeing fewer home buyers. While 56% of advisers reported seeing fewer investors. 

According to the report, banks have become less willing to advance funds. 

Alexander said the willingness of banks to advance finance was lower in September than in all other months since December last year, bar August.

CCCFA changes were a likely cause of the trend, Alexander said.

"The ability of banks to lend to borrowers with low deposits is being reduced, and banks are already undertaking the far deeper scrutiny of borrower expenses and income sources which CCCFA changes will require."

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