The potential for further increases in interest rates has triggered a record uptake of fixed-rate mortgages by first-time buyers.
In January, 85% of first time buyers took out a fixed-rate deal - the highest proportion on record, according to the Council of Mortgage Lenders (CML).
Among home-movers 70% chose a fixed-rate deal.
The average interest rate of these home loans was 5.27%, following the three rate rises since August 2006.
"Each month it seems that the prospect of another interest rate rise is balanced on a knife edge," said Michael Coogan, director general of the CML.
"More and more borrowers are protecting themselves against this risk and choosing the certainty of fixing their monthly mortgage payments," he added.
Such speculation should further fuel the rising demand for fixed-rate deals on mortgages & remortgages, Michael Cooke from homeowner loans specialist The Loan Helper comments "of course, homeowners often need to raise further funds from time to time, and for those who have already secured a fixed rate, a remortgage often does not make financial sense compared to a secured loan which may serve their needs much better by keeping that great fixed rate mortgage deal in place, yet still utilising available equity to secure a low rate loan to provide the funds required."
Despite the increased cost of home loans, house prices are still climbing around the UK.
The Communities and Local Government Department (DCLG) reported recently that house price inflation in January had gone up to 10.9%, pushing the cost of the average house up to £205,286.
However, there are some indications that the market may, eventually, cool off.
The Royal Institution of Chartered Surveyors (RICS) reported that last month new enquiries to estate agents from potential purchasers fell for the 3rd month in a row.
"The interest rate rises have started to worry would-be buyers with many concerned that they will be unable to meet mortgage repayments," said Ian Perry, spokesman for Royal Institution of Chartered Surveyors.
"Affordability for many will continue to decrease in the coming months as the January rise, and further rises take effect."
Darren Ferneyhough is a partner in
The Money Helper and renowned for his experience in a number of subjects in the UK financial services market. Darren currently writes for
Loan-Sense and
Mortgage-Sense as well as being instrumental in the design and strategy of the consumer loans site
The Loan HelperArticle Source: http://www.ArticleSphere.com
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