According to the CML’s market and data analyst Caroline Purdey, author of the new research, over half of the 1.8 million borrowers now on reverted variable rates have more than 10% equity and could potentially remortgage if they wished to. This seems likely to support remortgage demand as borrowers become more twitchy about future interest rates. For now, however, it seems many borrowers are adopting a "wait and see" approach.
Markets currently expect the Bank rate to rise from its current 0.5% to around 0.9% by the end of 2012 and 2% by the end of 2014. Under this scenario, the CML estimates that 85% of those borrowers who have reverted to variable rates would still be paying less than their original mortgage payment by the end of 2012, and around 58% would still be paying less than their original payment throughout 2014.
CML director general Paul Smee said: "Most households appear to be able to absorb anticipated interest rate rises over the next few years without seeing the cost of their monthly mortgage payment rise above its original level. Many households have seen a significant windfall from reverting onto variable rates over the past few years, although this will be less true for those coming off short-term fixed rates in the near future.
"The choice of whether or not to fix, and for how long, involves taking a view about the likely direction of future interest rates, along with a personal consideration of how much rate risk is acceptable to a household. Given the economic uncertainty, it is not surprising that for the time being many of those who have reverted onto variable rates and could remortgage are choosing to wait before they decide what to do next."
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