The Council of Mortgage Lenders’ monthly survey reveals that 85% of first time buyers chose a fixed rate deal in January. According to CML, this is the highest figure on record. Also, just over 70% of home movers also decided on a fixed rate product.

CML believes that the higher interest rates have led to this. “It is encouraging that increasing numbers of first-time buyers are looking into the payment certainty a fixed-rate mortgage provides, as they are the group that are more financially stretched and may suffer most if interest rates go up”, says Michael Coogan, CML’s director general.

Overall, fixed-rate mortgages accounted for 72% of all new loans in January - the
highest proportion since January 2006 - up from 69% in December.

The average interest rate of a fixed-rate loan in January was 5.27%, up from 5.23% in December, which is attractive when compared to the average interest rate of a discounted variable-rate product which reached 5.54%, up from 5.36% in December.

Coogan says: “Each month it seems that the prospect of another interest rate rise is balanced on a knife edge. More and more borrowers are protecting themselves against this risk, and choosing the certainty of fixing their monthly mortgage payments, which allows them to plan ahead with confidence.”