According to the Head of Lending at the Mortgage Advice Bureau, Brian Murphy, consumers remain wary of borrowing in this weakened economy.  Levels of lending for mortgaging and remortgaging remain weak despite the low interest rates available.  In comments related to the recent data released by the Council of Mortgage Lending (CML) Mr. Murphy noted that the most surprising trend is for borrowers to have higher demand for variable rates over fixed rates, especially with the low fixed rate deals available.

Mr. Murphy said “With the UK economy suffering a barrage of bad news and the country as a whole haunted by weak growth prospects, both mortgage lenders and borrowers are feeling more than a little punch drunk.

“Borrowers are clearly still deeply wary. This data shows that total lending to first time buyers rose in July, but the number of first time buyer loans was down both on the previous month and on the same time last year.

“It was particularly interesting to note the start of a gradual shift away from fixed rates towards variable rates.

“While during uncertain times like these, people's instinct is to seek out the stability and security of a fixed rate, more are being tempted by variable rates.

“This is less of a vote of confidence in the economy than recognition that its continued weakness will force the Bank of England to keep interest rates at rock bottom.

“All the economic mood music is that the base rate will stay at its current record low level until well into next year, and possibly even longer.

“As a result variable rates are suddenly looking less risky. There is a hint of encouragement here for the lenders, but lending levels are still low and there is a long way to go until this bruised industry can return to anything like normal.”