The findings have prompted the Abbey to cut the rate on its popular three-year fixed rate deal at 70 per cent LTV. This will happen tomorrow and will see the rate cut by 0.15 per cent to 5.39 per cent. With the £1,495 fee, this is a market leading deal, say Abbey.
Abbey's Index found that 56 per cent of homeowners would opt for a fixed rate mortgage, compared to 52 per cent one month ago and 47 per cent in the month prior. Demand for trackers has declined slightly, now at ten per cent, down one per cent from last month.
While three-year deals have steadily increased in popularity during 2008, the popularity of two year and five year deals has waned. Just two months ago 22 per cent of people said they would opt for a five year deal compared to just eight per cent now. Conversely, in July six per cent of homeowners said they would opt for a three year deal but the figure has now soared to 23 per cent.
Nici Audhlam Gardiner, Director of Abbey Mortgages, commented: "The research suggests that borrowers are not willing to gamble on a rate cut, instead they are more likely to opt for a medium term fix which will provide them with some financial security in these uncertain economic times. Providers like Abbey are offering great rates on three year fixes - our rate cut on the popular 70 per cent LTV deal makes this deal even more competitive at 5.39 per cent."
Comment
It would appear that wanting to know exactly what you are going to pay is important to people, because logically I would have thought a tracker would be the obvious choice in the current economic conditions where interest rates are likely to be cut several more times yet in the coming months.
By contrast, with the expectation of the "recession" lasting for a few years the choice of a three year deal appears logical.
