A couple weeks ago, James blogged about the growing trend for people choosing fixed-rate mortgages over trackers. He showed that even when fixed-rate products can cost more than trackers, buyers are expecting price rises and want to lock in the good deals they can.

Well, the Financial Conduct Authority (FCA) is expecting lenders to increase their fixed-rate product ranges. But, the FCA’s reasoning isn’t simple supply and demand. They think that the recent guidelines from the Mortgage Market Review (that’s the MMR that might cause delays to in-house advice) could push for longer-term rates.

The reason?

Affordability.

A spokeswoman for the FCA told Mortgage Strategy:

“For products with a term of less than five years, the MMR will require lenders to apply a stress test to take account of the impact of future interest rate rises when assessing affordability and this could have an impact on the sort of the products in the market.

“We don’t expect mortgage rates to increase as a result of the MMR, but we do think we could see the proportion of longer-term deals increase as a result of the changes. We will continue to monitor market developments and consider these when scoping future thematic MMR work.”

It’s tricky to predict how the FCA’s guidelines will affect the market, but it’s certainly an area to watch. Here at Limetree, we work to find the right mortgage products for each client, and affordability is a huge consideration.

Drop us a line if you have any questions about which term-length you should be considering. We’ll look into your particulars, and find the best matches.

Posted in Market Watch, Mortgages