Demand for five year fixed rate mortgages set to soar

Mortgage lenders should brace themselves for high demand for five-year fixed rate mortgages, according to the latest research from the Abbey Mortgage Index. In a study of almost 1,000 borrowers, 24 per cent said they would opt for a five-year fixed deal if they were to remortgage tomorrow.

The findings come amid reports of a shrinking mortgage market – according to a recent report there are 60 per cent fewer mortgages available now compared to the month prior to last year’s credit crunch. Abbey’s research suggests that borrowers are increasingly looking for certainty over a longer period of time with two-year fixed deals now trailing well behind the five-year deals in popularity.

Just one month ago, as few as 10 per cent of borrowers said they would choose a five-year fix if re-mortgaging tomorrow but this has more than doubled this month to 24 per cent. Two-year fixed rate mortgages are now marginally more popular than a month ago with a slight increase from seven to 10 per cent.

Nici Audhlam-Gardiner, Director of Abbey Mortgages, comments: “Recent reports about the shrinking mortgage market seem to have had a profound effect on borrowers. Not too long ago borrowers felt that shopping around regularly was the way to get the best deal, now homeowners faced with a dwindling number of mortgage deals seem keener then ever to lock themselves into a deal for longer than two years such as a five-year fix.”