Demand for fixed rate mortgages has reached an all-time high as borrowers take advantage of record low rates, new data shows.
According to a new report by Paragon Mortgages, 89% of mortgages introduced by brokers were fixed during the first three months of 2017 – up 6% on the previous quarter.
This continues a long-term upward trend that has risen particularly sharply since the end of 2010 when fixed rate and tracker mortgages comprised 46% and 45% of all mortgages, respectively.
By contrast, tracker mortgages have declined at almost exactly the same pace and now account for just 10% of mortgage business – its lowest ever level.
The Bank of England cut its base rate last year from 0.50% to 0.25%, which led to lenders slashing rates.
With the number of competitive deals on the market growing, many borrowers are choosing to remortgage to take advantage of the low rates currently on offer.
Fixed rate mortgages give borrowers long-term security and the ability to plan ahead as they know their rates will not rise.
However, they can be more expensive than tracker mortgages which are locked to the Bank of England base rate and there could also be a hefty redemption penalty if you decide to get out of a deal early.
Two-year fixed rates are still the most popular product, despite falling from 53% to 48% of all mortgages taken out.
Following the 3% in stamp duty last year, buy-to-let lending stabilised in the first quarter of 2017, accounting for 18% of all mortgages handled.
John Heron, managing director, Paragon Mortgages, said: “It’s clear to see that the benefit of certainty at such low rates is continuing to drive up the popularity of fixed rate mortgages – particularly five year fixed terms, which gained further ground in the first quarter of2017.
“The FACT Index gives Paragon a uniquely long-term view, and the ability to measure changing characteristics of the market, particularly in buy-to-let. The widening in favour of remortgages over purchase transactions suggests that supply to the private rental sector may be coming under pressure which in turn may lead to higher rents.”
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