The number of fixed rate mortgages taken out via intermediaries fell significantly between the third and fourth quarters of 2009.
According to the Financial Adviser Confidence Tracking (FACT) Index complied by mortgage lender Paragon, the proportion of fixed rate cases introduced by mortgage brokers fell from 62% in the third quarter to 46% in the final quarter of the year.
The dip represented the second consecutive quarterly fall in the popularity of fixed rate deals, after two quarterly increases in the first half of 2009.
Paragon attributed the lapse in fixed rate popularity to the perceived decreasing likelihood of a rise in Bank Base Rate.
Conversely, tracker mortgages got far more popular over the period, accounting for 45% of all mortgages arranged by brokers, compared to 33% in the third quarter of the year.
The index recorded that discount rate mortgages made up 6% of all mortgages arranged, with capped rate and cashback cases accounting for less than 3% of mortgage business.
John Heron, Paragon Mortgages’ managing director, said:
“We saw the proportion of fixed rate cases rise substantially in both the first and second quarters of the year, which is understandable as the Bank of England base rate had tumbled and borrowers wanted to lock themselves into attractive deals before the rate started to rise again.
“However, the rates attached to fixed rate deals are currently less attractive and borrowers increasingly opted for tracker deals during the latter half of the year, particularly in the final quarter.”
Interest-only mortgages represented just 18% of all broker-introduced deals, the lowest proportion since the third quarter of 2004.
That is in part down to the decrease in buy-to-let deals being taken out, as there are very few of these mortgages (usually arranged on an interest-only basis) available. Also, as lenders have tightened up their criteria, fewer will allow people to take out interest-only deals on their residential mortgages.
The reduction may also be an indication that borrowers are being more sensible and conservative, and avoiding interest-only deals, which are inherently higher-risk than repayment-type deals.