Fixed rate mortgages continued their "dramatic decline" in popularity during October, accounting for just 26 per cent of the mortgage market compared to 83 per cent in June.
According to the latest mortgage index from the broker John Charcol, the fixed rate mortgage market share has plummeted, experiencing their smallest market share in October since November 2008.
Drew Wotherspoon, spokesperson for John Charcol explained that the sharp decrease in popularity of fixed rate mortgages in favour of variable rates, particularly tracker mortgages, "reflects the rapid chance in mortgage pricing and interest rate sentiment over the last year."
As the Bank of England voted to keep interest rates at their record low of 0.5 per cent last month, as it did again this month, there is little incentive for mortgage customers to choose fixed rates, he continued, pushing them towards tracker mortgages.
Mr Wotherspoon added that the announcement of a further £25billion of funding for the Quantitative Easing programme indicates that this situation will change for several months.
"Even if longer term fixed rates don't get much cheaper than those currently available at just under 5%, there seems a good prospect that borrowers on a variable rate will be able to benefit from rates more than 2% lower for the time being and then switch to a similarly priced fixed rate later," he said.
The index also shows that there was a slight increase in the proportion of purchases in October, the highest percentage since John Charcol's records began, accounting for 58.5 per cent of the market.
While first time buyers continue to be largely frozen out of the market by high deposits and credit score requirements, first time buyer mortgages managed to take a larger proportion of sales in October, rising to 15.3 per cent from 10.4 per cent in September.
This is because several lenders have moved to improve their products for first time buyers, offering 85 per cent and even 90 per cent loan to value deals in the last month, which Mr Wotherspoon says is an encouraging sign for the future of the first time buyer market.
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