Uncertainty over the future of interest rates is prompting borrowers to opt for fixed rates, says Spicerhaart.
Belief that interest rates are likely to increase and stay high prompted an unusually high percentage of borrowers to opt for fixed rate mortgages of five or more years in February.
Spicerhaart Financial Services monthly survey has revealed that the level of borrowers opting for longer term fixed rates, of five-year plus, increased by 11% in February, to a record 32% of all mortgages.
Three-year fixed rate deals accounted for 14% of mortgages in February.
The level of two-year fixed rate deals dropped to 46% from 69% in January, with variable rates accounting for only 8% of all mortgages taken out in February.
February also saw an increase in interest-only mortgages as the January rate rise took effect and borrowers faced increasing affordability constraints.
The survey also reveals that the percentage of borrowers taking out buy-to-let mortgages has increased slightly from 8% in January, to 10% in February.
Steve Cox, operations director of Spicerhaart Financial Services, says: Borrowers are wary of two-year fixed rate deals that will not safeguard them sufficiently against this anticipated long term rise in rates. Opting for five-year deals gives them long-term security.
Many investors are looking to property for a long term investment. Although interest rates have increased, the cost of borrowing is being met by rental income, as buy-to-let still offers excellent returns.
There will always remain a high demand for rental accommodation with increased immigration, a growing population and renting remaining a popular lifestyle option.
“However, the heightened sensitivity to changes in interest rates will make property investors think carefully before committing to invest in a property.