Homeowners who are spooked by predictions of rising interest rates and higher mortgage payments are flocking to fixed rate mortgages, according to market analysis from Paragon Mortgages.
The data from the lender, gathered from its Financial Advisor Confidence Tracker, a survey of mortgage intermediaries, shows that the uptake of fixed rate mortgages through intermediaries in recent months has been at "record levels", accounting for 70 per cent of home loans in the three months to the end of June.
This is a significant increase on the first quarter of 2009, when fixed rate mortgages represented a more equal 55 per cent applications, as more borrowers were lured to tracker mortgages by falling interest rates.
The final quarter of 2008 saw 41 per cent of borrowers opt for fixed rate mortgages.
Two year fixed rate mortgages remain the most popular among borrowers who opt for the security of a rate that will not fluctuate with the Bank of England base rate, with 40 per cent choosing to fix for the two years, compared to 32 per cent going for three year fixed rate deals, and 24 per cent for five year fixed rate mortgages.
While mortgage customers are keen to protect themselves from short-term changes in the base rate, the majority are not thinking long-term, with just 2.5 per cent choosing a 10 year fixed rate.
John Heron, managing director of Paragon Mortgages', commented: "With borrowers unsure about the next move for interest rates, they appear to have been opting for the security of fixed rate deals. It is likely that the next move for base rates will be upwards, but it is unclear when that will be."
But, Mr Heron added that it may be necessity that has driven many to opt for fixed rate deals over tracker mortgages, simply because of the limited choice in the current mortgage market.
"The options for borrowers have generally been limited as mortgage finance across the UK market has dried up," he said.
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