Appetite for five-year fixed rate deals up

Demand for five year fixed rate mortgages has increased for the third successive month, according to the latest research from 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.

Demand for the longer-term product 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. Abbey Mortgages' research suggests that 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.

Demand for two and three year fixes remained relatively steady with eight per cent of mortgagees choosing a two year fix, while nine per cent said that they would opt for a three year fix.

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

"For borrowers who do want to fix for five years, there are some very competitive deals out there at the moment including Abbey's 5.75 per cent product available up to 75 per cent loan to value."