A growing number of UK mortgage borrowers are shunning five-year fixed deals in favour of two-year options, according to the latest Business Outlook Survey from Family Building Society.
The six-monthly survey, which canvassed mortgage intermediaries and financial advisers, found more than three quarters had seen a marked increase in applications for two-year fixed rate mortgages, with over half of all applicants choosing this shorter-term option.
Alistair Nimmo, director of marketing at Family Building Society, said the trend reflected market expectations that interest rates could fall further.
“With three Bank of England Bank Rate reductions predicted this year, it is not surprising that borrowers do not want to commit themselves to a longer-term mortgage,” he said.
“Add in the current economic and worldwide political uncertainty which may cause further downward pressure on Bank Rate, fixing outgoings for a short period makes sense while waiting for possible cheaper rates in the short term.”
The findings also highlight sustained demand among young people looking to step onto the housing ladder. Three quarters of brokers said they were seeing continued enthusiasm from first-time buyers, with two thirds reporting no sign of a slowdown in that segment of the market.
However, affordability remains a challenge. Nearly two thirds of intermediaries reported a rise in enquiries involving family members offering financial support to children and grandchildren for mortgage deposits or moving costs.
Nimmo pointed to the growing role of family support in homeownership as a driver behind the lender’s latest product innovation. “While it remains as difficult as ever for first time buyers to get onto the property ladder and not helped by the recent reintroduction of the lower Stamp Duty thresholds, the survey’s findings on families’ continual desire to help family members into a home of their own confirms our decision to have recently introduced a fee free 90% LTV Joint Borrower Sole Proprietor product.”
The survey also revealed broader market sentiment. Nearly half of intermediaries said smaller houses were the most popular property type among buyers, followed by larger family homes. Flats, bungalows and maisonettes were among the least desirable, with three quarters of those surveyed reporting low demand for those types.
Concerns around stamp duty remain. Just over half of advisers said clients were worried about the additional costs introduced by last month’s changes to stamp duty thresholds. Despite this, nearly two thirds said they did not expect the changes to impact application volumes or house prices over the next six months.
The report paints a picture of a market adjusting cautiously to future rate movements, while younger buyers — often with family assistance — continue to strive for homeownership in the face of persistent affordability barriers.
