The proportion of homeowners opting for five-year fixes is at an all-time high, according to new research by Paragon Mortgages.
Its latest Financial Advisers Confidence Tracking Index report found that 39 per cent of all mortgages were now five-year fixed-rate deals, the highest proportion it has recorded.
Fears about future interest rate rises are driving this trend. In total, almost 90 per cent of all mortgages arranged in the last quarter were fixed rate deals. This is up from 87 per cent in the same quarter last year.
Two-year fixes remained the most product popular, accounting for 47 per cent of all mortgages.
According to Paragon the popularity of fixed-rate mortgages has been rising steadily since 2011, but in the third quarter of this year there has been an increase in sales of five-year fixes and an easing of demand for short-term mortgage deals.
Paragon Mortgages managing director John Heron says: “With interest rates gradually increasing after a long period of historic lows, it is not surprising that homeowners are racing to fix the cost of their mortgage for the longer term. Over the coming months, it is likely that we will see a further surge of borrowers locking into fixed rates before they climb higher.”
This FACT Index – based on interviews with 199 mortgage intermediaries – shows that while much of the demand for lending comes from those remortgaging, this declined between Q2 and Q3 of this year, from 39 to 36 per cent of the mortgage market.
Meanwhile, first-time buyer and buy-to-let mortgages now take a higher percentage of the market. BTL mortgages now make up 17 per cent of all mortgage cases.
Heron adds: “It is positive for the buy-to-let market to see application numbers increase after weaker numbers in the previous three quarters. Hopefully this will be a sign of things to come for the BTL market after a period of uncertainty following regulatory changes, reduced tax relief and the uncertainty around Brexit.”