The Council of Mortgage Lenders recently published new research that found 1.8 million mortgage holders whose fixed-rate deals have ended, and who are currently on their lenders variable rate, are paying an average of £2,600 a year less than on their previous deal. This is no real surprise as the base rate is currently incredibly low, but the report also pointed out that half of those 1.8 million mortgage holders had more than 10% equity, allowing them to remortgage if they wish.

At the moment it seems as if most borrowers are content to wait and see what happens with the bank base rate, but at least they have the option to remortgage if they want to and mortgage demand is likely to rise as borrowers become more anxious about the future. Markets are expecting the Bank of England to increase its rates to about 0.9% by the end of next year, and to 2% by the end of 2014. If this happens the CML has estimated that 85% of borrowers who have reverted to variable rates would still be paying less than their original mortgage repayments by the end of 2012, and 58% would still be paying less by the end of 2014.

This is good news for the housing market as it seems to indicate the majority of households will be able to absorb interest rate rises without putting their mortgage payments in peril, and consumers remain cautious about entering into fixed-rate deals in case they appear unattractive in the longer term. It looks as if Grant Shapps will have a hard time making 30 year fixed rate mortgages appear attractive, at least at the moment.