Record take-up of fixed-rate mortgages

10 April 2007

There’s been a record take-up of fixed-rate mortgages among first-time buyers.  Figures from the Council of Mortgage Lenders show that in February, 87% of first-time buyers chose a fixed-rate mortgage.  That’s up from the previous record of 84% in January and 82% in the same month last year.

Fears that interest rates could rise again next month also prompted a majority of home movers to take out a fixed-rate deal; 70% in February, compared with 67% in the previous month.  Overall, fixed-rate mortgages accounted for 76% of all mortgages for house purchase – returning to their highest-ever level last achieved in November 2005, when they also reached 76%.

The Council of Mortgage Lenders (CML) says fixed-rate mortgages remain attractively priced compared with other products.  Since August 2006, the price of fixed-rate deals has increased by just 0.16%, while discounted, tracker and standard variable-rate mortgages have increased by more than 0.5%.  According to the CML, the average interest rate on a fixed-rate mortgage in February was 5.34%, up from 5.27% in January.

Michael Coogan, who’s director general of the CML, said: “With the chance of at least one more interest rate rise this year, first-time buyers are taking the sensible option of taking out fixed-rate deals, and locking into the payment security they provide.”