Five-year mortgages set for boom

Five-year fixed-rate mortgage deals are set to rocket in popularity – as property market uncertainty leads buyers to fix for longer, new research has claimed.

In a study carried out by Abbey, which questioned over 1,000 mortgage borrowers, 24 per cent said they would opt for a five-year fixed deal if they were to re-mortgage tomorrow.

This is up from just 12 per cent in March.

The findings come amid reports of a shrinking mortgage market with significantly fewer mortgages now available when compared to the month prior to last year’s credit crunch.

Research from price comparison site MoneySupermarket.com found during March that the number of mortgage products on the market had fallen by 60 per cent over the past seven months.

"Recent reports about the shrinking mortgage market seem to have had a profound effect on borrowers," explained Nici Audhlam-Gardiner, director of Abbey Mortgages.

“Not too long ago borrowers felt that shopping around regularly was the way to get the best deal, now homeowners faced with a dwindling number of mortgage deals seem keener then ever to lock themselves into a deal for longer than two years such as a five-year fix."

Abbey’s research suggests that borrowers are increasingly looking for certainty over a longer period of time - with two-year fixed deals now trailing well behind the five-year deals in popularity.

Despite this, two-year fixed rate deals remain the second most popular choice among borrowers, with ten per cent of borrowers suggesting they would choose such a product when re-mortgaging.

Three-year fixes are also popular, chosen by eight per cent of borrowers.

In contrast, two-year tracker and flexible track mortgages attract just two and three per cent of the market respectively.