There was a move away from fixed-rate mortgages in October, with levels of new fixed-rate loans falling to 68% from 72% in September, according to the Council of Mortgage Lenders (CML).

Fixed-rate loans have been popular throughout 2007 with levels consistently at or above 70%. But the trend towards variable rate loans may increase in coming months as the expectation of further interest rate cuts lessens the need for borrowers to lock in and guard against rate rises.

Mortgage affordability continued to deteriorate in October as interest payments consumed the highest levels of income in over 15 years. First-time buyers contributed 20.6% of their income towards mortgage interest, up from 20.4% in September and the highest level since 1991, and movers contributed 17.6%, up from 17.5% in September and the highest level since 1992. The Bank of Englands rate reduction of 0.25% will provide some relief to borrowers in coming months.

Lending volumes remained strong in October totalling £33.5bn, a 9% rise from £30.6bn in September and a year ago. The majority of these loans are likely to have been approved before the full impact of the credit crunch and the problems associated with Northern Rock took hold. Lending is expected to be more subdued in coming months as mortgage approval numbers are showing.

Home movers typically borrowed 3.02 times their income, unchanged from September, whilst first-time buyers typically borrowed 3.36 times their income, down from 3.38 in September.