The three year fixed rate mortgage is now three times more popular than six months ago, research from Abbey has revealed.
According to the research, as the economy remains unstable, the three year fixed rate mortgage
has become king as 21 per cent of homeowners opt for the relative stability and flexibility it offers.
In response to the rise of the fixed rate mortgage, rates have been falling left right and centre, making the five year fixed rate less popular as consumers' confidence in the mortgage market is boosted.
But it is not just the three year fixed rate deal that is enjoying a come back, the average rates on two year fixed mortgages have dropped to around 6.39 per cent according to Moneyfacts.co.uk, a rate that is not far off what it was before the credit crunch struck.
Speaking of the positive news, analyst at Moneyfacts.co.uk, Michelle Slade, said: "The average rate is a good indication of what is going on in the market, but what is more telling is what the largest lenders have done with their rates, as the top lenders make up 77.2 per cent of the mortgage market.
"The best news for consumers is that the UK's biggest mortgage lender
, Halifax has passed on the biggest cut in rates to borrowers and unlike other lenders, the average fee on these deals has dropped."
Speaking of the impact this could have on repossession levels, Ms Slade added: "The increase in borrowers' monthly repayments should not be as much as it would have been had they remortgaged two months ago, which will hopefully mean more borrowers can afford to remain in their homes."
As the good news spreads, Cheltenham & Gloucester is urging those who are soon due to remortgage
to shop around and compare the mortgage market. According to C&G research, one in three remortgagers stick to their current lender because they believe that is their only option.
Many of those who stick with their current lender do so because they fear rejection from another lender. Commenting, C&G managing director, Stephen Noakes said: "In a climate of low confidence, homeowners are less willing to shop around for a new mortgage. Fear of their application being rejected, the belief they will have no choice of deals and a lack of understanding of how lenders look at eligibility are all contributing to this reluctance."
However, Mr Noakes urged: "Mortgage rates are now falling and remortgagers should take the opportunity to shop around before committing to a new deal. Doing nothing could mean you end up paying far more than necessary."
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