The proportion of homebuyers applying for a fixed-rate deal fell to its lowest level in almost two years in September, according to the Mortgage Advice Bureau.
Despite an anticipated interest rate rise in 2015, only 92 per cent of September’s purchase applicants opted for a fixed-rate product.
That’s a fall of 2 per cent from a year ago, and the lowest proportion seen since November 2012 when just 90 per cent chose to fix.
Fixed rate products suffered a similar decline in popularity among remortgagers last month, with 89 per cent of existing homeowners remortgaging onto a fixed rate compared to 92 per cent a year ago.
The reduced popularity of fixed rate products coincides with strong price competition between lenders over tracker rates.
Using data from Moneyfacts, MAB’s index shows while two-year fixed mortgage rates have risen steadily during 2014, two-year tracker rates reached their lowest level (2.63 per cent) in September since 2007, while two-year fixed rates were at a 16-month high.
There is now a 1.08 per cent gap between two-year tracker rates and the next most affordable option: a three-year fixed deal.
Brian Murphy, head of lending at Mortgage Advice Bureau, says once rates go up consumer preference may swing back to longer-term fixed rate products.
“Buyers who are unsure on their product choices should consider speaking to an independent mortgage broker, who can assess their situation and provide guidance on the best option for them from across the market.
“Now is an ideal time for existing homeowners to check whether their current mortgage is still the best deal: acting fast before interest rates rise could prove beneficial in the long-term.”
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