Fixed rate mortgages saw a sharp dip in popularity in the fourth quarter of 2009, as more borrowers chose a tracker mortgage deal, according to new data from Paragon Mortgages.
Paragon's Financial Adviser Confidence Tracking (FACT) Index showed that, ccompared to a 62 per cent market share among mortgage brokers in the third quarter of 2009, fixed rate mortgages accounted for 46 per cent of total business in the final three months of the year.
As the base rate continues to remain static at 0.5 per cent, where it has stood since march 2009, borrowers are seemingly becoming increasingly bold about choosing a variable rate mortgage over the security of a fixed rate deal.
Meanwhile, as borrowers look to cash in on the static base rate, tracker mortgages accounted for 45 per cent of mortgage in the fourth quarter, up from 33 per cent in the previous quarter.
Commenting on the data, John Heron, managing director of Paragon Mortgages, said: "We saw the proportion of fixed rate cases rise substantially in both the first and second quarters of the year, which is understandable as the Bank of England base rate had tumbled and borrowers wanted to lock themselves into attractive deals before the rate started to rise again."
But despite a low base rate, fixed rate mortgages remained uncompetitive, pushing borrowers away.
As Mr Heron explained, "the rates attached to fixed rate deals are currently less attractive and borrowers increasingly opted for tracker deals during the latter half of the year, particularly in the final quarter."
Despite the recession squeezing household finances and British consumers looking for ways to cut back on monthly outgoings, interest only mortgages fell to their lowest proportion of total mortgage business since the third quarter of 2004, accounting for 18 per cent of the market.
"The use of capital and interest, in preference to interest only, is being driven by a more conservative and prudent approach across the whole industry," Mr heron added, "as well as better affordability due to low interest rates."
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