Almost nine in ten borrowers fixing their mortgages

Fixed-rate mortgages have become increasing popular among residential homeowners after borrowing rates for three, five and ten-year deals dropped between March and May, a UK broker has said.

Stephen Smith, Director of Housing at Legal & General, said fixed-rate mortgages have provided "good value" for homeowners compared with variable-rate products, which are unpopular given that the Bank of England is more likely to increase rather than cut interest rates.

"Fixed rates had been offering the full package until recently, in that they had been getting cheaper and they offer valuable peace of mind in a turbulent and uncertain environment," Mr Smith said.

Data from the broker shows that 87 per cent of residential borrowers opted for fixed-rate mortgages in the second quarter of 2009, compared with 71 per cent in the previous quarter.

Average loan-to-value rates were 60 per cent for residential borrowing and 70 per cent in buy to let.

However, interest rates on two-year fixed-rate mortgages increased in the latest quarter and Mr Smith believes the pricing may have "bottomed out".

"It feels like we are entering a new phase of the credit crunch now though - talk of a recovery has been gathering pace … There has been no significant upturn in house sales or mortgage lending, but both consumer and adviser confidence is up."

Last month Ray Boulger, Senior Technical Manager at broker John Charcol, said some lenders might hike borrowing rates on competitive products to reduce the volume of applications they receive.

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