With fears of an imminent rise in interest rates, 87 per cent of FTBs chose a fixed rate loan in February, the CML reported. This was a rise from 84 per cent in January and from 82 per cent in February 2006.
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The popularity of fixed rate deals remained attractive in comparison to other packages as the price increased by 0.16 per cent since August 2006 while discounted, tracker and standard variable rate products had increased by more than 0.50 per cent.
As a result, the average interest rate on a fixed rate loan in February was 5.34 per cent, up from 5.27 per cent in January. Discounted variable rate products reached 5.68 per cent in February, up from 5.54 per cent in the previous month.
Fixed rate deals are also remaining popular among movers, 70 per cent of whom took out a fixed rate deal in February, a rise of three per cent from January, the study indicated.
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Michael Coogan, CML director-general, 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 security they provide.”
Alan Lakey, partner at Highclere Financial Services, said: “My intuition is that FTBs are stretching themselves to the limit financially and the only solution is a fixed rate mortgage so that the loan repayments are affordable. Another option is a capped rate, and if Base Rate falls, these will become more popular.”
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