First-time buyers choosing fixed-rate mortgages
New homeowners are increasingly going for fixed-rate mortgages over fears interest rates will rise.
While this might prove a costly mistake as experts predict rates are near their peak (full story), stretched affordability means many first-time buyers simply cannot afford even a slight increase in their mortgage repayments.
Council of Mortgage Lenders' (CML) figures show affordability for first-time buyers is at its worst since 1992, leading a record proportion to choose fixed-rate mortgages.
"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 Michael Coogan CML director-general.
"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."
CML figures show in February 87 per cent of first-time buyers chose a fixed-rate mortgage, up from 84 per cent in January, and 82 per cent in the same month last year.
Home movers also favoured fixed-rate mortgages, with 70 per cent of Britons moving house choosing fixed-rate mortgages, up from 67 per cent in the previous month.
The average interest rate charged on a fixed-rate mortgage in February was 5.34 per cent, up from 5.27 per cent in January.
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