CML: Fixed-rate mortgages favourites ahead of rate rise

14 March 2007
Home loan customers are increasingly looking ahead to another likely base rate rise in spring or summer 2007 and opting for a fixed-rate mortgage deal which protects them from its impact, the Council of Mortgage Lenders (CML) has found.

In January, the highest proportion of first-time buyers ever recorded chose a fixed-rate product - 85 per cent - while 70 per cent of home movers took the same path.

Despite increasing demand, the price of fixed-rate loans remained competitive through the start of the year, the CML found.

The average interest rate was 5.27 per cent, up from 5.23 per cent in December but lower than the 5.54 per cent average on discounted variable-rate products.

CML director general Michael Coogan commended customers opting for fixed-rates: "Each month it seems that the prospect of another interest rate rise is balanced on a knife edge," he remarked.

"More and more borrowers are protecting themselves against this risk and choosing the certainty of fixing their monthly mortgage payments, which allows them to plan ahead with confidence," Mr Coogan added.

Meanwhile, the Royal Institute of Chartered Surveyors predicted that "interest rates [will] continue their upward path in the coming months".

To learn more about fixed-rate mortgages, click here.

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