Finance - had your fix? Dont be in too much of a hurry to switch your investment mortgage to a variable rate
11th May 2006
Latest figures from the Council of Mortgage Lenders (CML) show that in recent months more borrowers are now opting for variable rate mortgages than fixed rates, writes David Lawrenson.
The reason behind this is that money market swap rates have gone up. It is these swap rates - which in turn are based on long term (or long dated) government bond (or gilts) prices - that the mortgage lenders use to back their fixed term products.
If the price of these bonds falls, then the yields on the bonds go up. (It's a bit of a long argument, but please trust me - that's how it works!)
And, as these yields are really the benchmarks of people's expectations of what will happen to interest rates over time, and because they are used to back the fixed rate mortgage offers, so the interest rates on fixed term deals have risen too.
Bottom line - fixed rates have become less popular because they have become more expensive.
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