Record numbers of first-time buyers take out fixed-rate loans

Fears that interest rates could rise next month have led a record proportion of first-time buyers to opt for a fixed-rate mortgage, according to new data from the Council of Mortgage Lenders.

Data for February showed that 87% of first-time buyers chose a fixed-rate loan - up from the previous record of 84% in January, and 82% in the same month last year. February's data also showed that 70% of home movers also took out a fixed-rate deal, compared to 67% in the previous month. And overall, fixed-rate loans accounted for 76% of all loans for house purchase - returning to their highest-ever level last achieved in November 2005 when they also reached 76%.

Fixed-rate deals remain attractively priced compared to other products. Since August 2006 the price of fixed-rate deals has increased by just 0.16%, while discounted, tracker and standard variable-rate products have increased by more than 0.5%. The average interest rate on a fixed-rate loan in February was 5.34%, up from 5.27% in January. Discounted variable-rate products reached 5.68% in February, up from 5.54% in the previous month.

Commenting on the data, CML Director General Michael Coogan said: "With the chance of at least one more interest rate rise this year, first-time buyers are taking the sensible option of taking out fixed-rate deals, and locking into the payment security they provide. First-time buyers are the most financially stretched group, and the fact that a record number of them are choosing a fixed-rate deal demonstrates their desire to plan ahead and avoid the risks interest rate rises would bring."