|
Monday 22nd February 2010
Fixed rate mortgages prove popular
Fixed rate mortgages enjoyed their most popular year ever in 2009, accounting for more than two-thirds of all lending, research has shown.
Around 68% of all mortgages taken out during the year were fixed rate policies, the highest proportion since the product was first launched, according to Halifax.
The popularity of the deals bucked the usual trend, which sees people opting to fix their interest rate at a time when the Bank of England base rate is rising.
Halifax attributed this to the fact that many borrowers thought variable rate deals were already as low as they could go, so they instead chose fixed rate ones to protect themselves from any future rate rises.
Fixed rate mortgages were first launched in the late 1980s, and by 1989 there were 12 different products available from 12 lenders. Before this, borrowers had little choice but to be on their lenders' standard variable rate.
But the average rate charged on one of the deals was 12.75%, reflecting the fact that the base rate peaked at 14.88% in October 1989.
In the early months following their introduction, the standard term for a fixed rate deal was two years, with options of three and five years occasionally available. As the product became more established, people were able to select terms ranging from one to 25-years, although today 10 years is the longest period for which people can fix.
There are currently more than 1,300 fixed rate deals offered by 69 lenders, with an average rate of 4.9%, the second lowest since they were launched, after the average interest charged on the deals dipped to 4.23% in 2003.
Halifax said the highest interest rate it had ever charged on a fixed rate mortgage was 13.85% in 1990, while the lowest was just 1.99% in February 2007.
Source: Press Association