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Demand for five year fixed-rate mortgages up

Wednesday, 21 May 2008 8:06 AM

Demand for five-year fixed-rate mortgages has increased to 30 per cent of the market in May, according to research for Abbey.

This represents the third successive monthly increase such products, according to the Abbey Mortgage Index.

In a study of almost 1,000 mortgagees, 30 per cent said they would opt for a five-year fixed deal if they were to remortgage tomorrow.

Furthermore, demand for the longer-term products grew steadily from seven per cent in February to 12 per cent in March. This figure doubled to 24 per cent in April and has grown again to 30 per cent in May.

Much of this demand is anticipated to come from the 3,835 people who are due come off fixed-rate deals every day this year, according to Abbey.

Financial Services Authority Figures (FSA) show 1.4 million homeowners are due complete fixed-rate deals in 2008.

Abbey Mortgages' research suggests borrowers are relying on the financial certainty that a five-year deal provides, compared to shorter fixed-rate deals or standard variable rate (SVR) and tracker products.

"Opting for a longer term fix rate mortgage will provide mortgage borrowers with financial security in uncertain economic times," said Phil Cliff, Abbey Mortgage director.

"While the May decision by the Bank of England was to maintain the base rate at five per cent, inflationary pressures mean that it is unlikely to fall again soon, and some commentators even think that inflation could lead to increasing mortgage rates."

Chris O'Toole

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