Mortgage borrowers are moving away from traditional fixed-rate deals towards tracker-based and flexible-rate mortgages, according to the first quarterly mortgage borrowing survey by My Mortgage Direct.
Analysing mortgage borrowing over the last three months, the survey shows a marked move away from fixed-rate deals in favour of variable discounted and tracker rates.
Just 20 per cent of those arranging their mortgages through brokers went for fixed-rate deals in January, My Mortgage Direct found.
There was a resurgence in the popularity of fixed-rate deals in March, but the majority were for two-year deals, revealing that borrowers are eschewing the traditional five-year deal.
"This pattern may well be because remortgage customers coming to the end of five year fixed rates fixed at the end of the 1990s on rates of about seven per cent feel they have paid enough to their lender and are now on the hunt for the cheapest deals - there is a big difference in cost between a two and five year fixed," said Cath Hearnden, joint director of My Mortgage Direct.
In January 60 per cent of borrowers opted for interest-only mortgages, but Ms Hearnden warns people not to get caught out in the long-term.
"Borrowers have clearly been squeezed by higher base rates, hence the interest only choice for many," Ms Hearnden warned.
"Obviously the repayments are considerably lower in the short term, but many buyers will be in for a shock many years down the road when the mortgage is due to be paid off unless they have a suitable repayment vehicle in place." Click here to find out more about mortgage rates.
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