Fixed-rate loan popularity 'soars'
A record number of first-time buyers are taking out fixed-rate mortgages due to interest rate rise fears, new research says.The Council of Mortgage Lenders (CML) says that nine out of ten new homeowners chose fixed-rate loans in February, beating the record set a month previously.Interest rates currently stand at 5.25 per cent, with the Bank of England voting to hold base rates in February, March and April.However, the likelihood of a quarter of a per cent rise in May is now very high, analysts suggest."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," said CML director general Michael Coogan."First-time buyers are the most financially stretched group, and the fact that a record number of them are choosing a fixed-rate deal demonstrates their desire to plan ahead and avoid the risks interest rate rises would bring."The CML says that since August 2006 fixed-rate loans deals have increased in price by 0.16 per cent, compared to half a per cent for discounted, tracker and standard variable-rate products.Commenting on today's survey, Nici Audhlam, head of mortgages at Abbey, said: "Understandably the elevated costs and expected interest rises are threatening to homebuyers and it is not surprising that our [own] mortgage research has shown that 2.1 million people are put off home buying because they cannot find the right mortgage."
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