Borrowers picking wrong UK mortgages
www.moneynews.co.uk > Mortgages > Borrowers picking wrong UK mortgages
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Money News |
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Borrowers picking wrong UK mortgages
Thu 14th Apr 2005
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Research by My Mortgage Direct revealed that when deciding on a mortgage deal many people act on fear rather than reason.
And it seems that despite having a good understanding of how interest rates work and the effect that rising rates will have, they still make the wrong choice.
"The percentage of fixed rates taken tends to rise when the Bank of England rate rises, yet as the market levels borrowers tend to go back to trackers," explained My Mortgage Direct's joint director, Cath Hearnden.
The ironic thing is that when there is a period of stability, fixed rate mortgages are in fact the best bet as they offer the cheapest deals.
Additionally, Rising rates mean that lenders tend to increase their fixed rate deals to anticipate further hikes.
Although, Ms Hearnden knows that borrowers are making foolish decisions she has seen a pattern emerge that may have more to do with human nature than lack of intelligence.
"This is also the way consumers tend to react to investment markets, selling shares when the market is falling and only buying in on a rising market," she said.
"Investors and mortgage borrowers alike react to trends and worry about missing out."
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