Fears of interest rises prompt popularity of fixed rate mortgages

19 May 2005
The vast majority of mortgage holders are opting for fixed rate mortgage deals as fears rise about a possible hike in interest rates.

The Mortgages Direct mortgage survey for April reveals that 84 per cent of borrowers chose a fixed rate deal last month - an increase of 54 percentage points since April 2004.

Of the fixed rate mortgages, the two-year deal was the most popular, attracting 46 per cent of borrowers, whilst almost one in five (18 per cent) went for a three-year fixed deal, and 21 per cent were tempted by five-year or longer deals.

"The increasing popularity of short term fixed rate lending indicates that borrowers are nervous about imminent hikes in interest rates," said Peter Gladdy, director of Mortgages Direct.

"However they are evidently confident that stability will return in the longer term, as only a small percentage of borrowers are choosing fixed rates for five years and longer."

The Bank of England's Monetary Policy Committee (MPC) opted to maintain interest rates at 4.75 per cent for the ninth consecutive month earlier in May.

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