The study revealed tracker mortgages had lost their appeal, with nine out of 10 first-time buyers (FTBs) opting for fixed rate mortgages – up from eight out of 10 in August 2006. Over the same period, fixed rate products taken out by remortgagors jumped from 40 to 80 per cent.
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The research showed that the August 2006 rate rise saw four out of 10 home owners opt for fixed rate mortgages while the November 2006 rise saw seven out of 10 home owners opt to fix their mortgages. This jumped to eight out of 10 borrowers after a third increase in January 2007.
FTBs have traditionally been more cautious over rates than those looking to remortgage, but remortgagors are now showing signs of increased caution, the study suggested.
David Kuo, head of personal finance at Fool.co.uk, said: “Fixed rates are the best way for home owners to insulate themselves from rate rises.
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“Rates are expected to rise 0.25 per cent in the next two months and a further 0.25 per cent six months after that.
There is no guarantee that Base Rate will rise to 5.75 per cent before the end of 2007. However, borrowers should resist second-guessing the direction of rates when their homes are at stake.”
Martin Wade, director at Mortgage Options, said: “Rate rises always cause concern, particularly for those with a limited budget.”
