Fixed rates chosen to keep rate rises at bay
(11 April 2007)

More first-time buyers are opting for fixed-rate deals amid fears of rising interest rates, the Council of Mortgage Lenders (CML) has said.

Figures released by the organisation shows an increase of three per cent in the number of new house buyers in February compared with the previous month.

In addition, 70 per cent of house movers also chose to go with fixed products, compared with 67 per cent in January.

The figures have helped the level of fixed-rate loans to return to its highest point of accounting for 76 per cent of the total mortgage market – a level it last reached in November 2005.

CML director general, Michael Coogan, commented: "With the chance of at least one more interest rate rise this year, first-time buyers are taking the sensible option of taking out fixed-rate deals, and locking into the payment security they provide."

He added that first-time buyers were looking to avoid the risks posed by interest rate rises through choosing fixed-rate loans.

Commenting on the findings, Nici Audhlam Gardiner, head of mortgages at Abbey, said that first-time buyers were particularly focusing on repayment security as fluctuation in affordability levels could result in arrears.