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With fixed rate mortgages refusing to fall much in price, variable rates or discounted rates mortgages continue to be flavour of the month in August.

The monthly activity monitor from various sources revealed less than half of mortgage borrowers chose a fixed rate in August, the lowest number since December 2008.

Following the Monetary Policy Committee’s (MPC) decision in August 2009 to extend the quantitative easing programme, plus subsequent comments from Bank of England governor Mervyn King, it looks as if interest rates will remain very low for at least the next two to three years on the back of a very slow economic recovery.

Taking this into account, we have continued to advise a large proportion of our clients to take a variable rate mortgage, as the differential between a fixed rate and variable rate pricing is now such that fixed rates appear to be discounting the rise in interest rates which will eventually happen too much.

The reduction in take up of fixed rate mortgages has not only been restricted to individual cases,the volume of lending has fallen even further, to only just over 35% of the total lending, clearly showing that borrowers taking larger mortgages were particularly attracted by variable rates. So far this month the proportion of clients choosing a fixed rate is now stabilising.

First time buyer activity increased a little on the month to 13.2%, but is still far below the percentages seen earlier this year, as many potential first time buyers continue to struggle to find sufficient funds to cover the large deposit and associated purchase costs, and to meet lenders credit score requirements for high loan to value (LTV) mortgages.