LONDON - The popularity of fixed rate mortgages is on the rise as first-time buyers buckle down to the prospect of higher interest rates, according to data from the Council of Mortgage Lenders.

CML said 85 pct of first-time buyers chose a fixed-rate deal in January -- the highest figure on record. For the rest the figure stood at just over 70 pct.
Overall, fixed-rate mortgages accounted for 72 pct of all new loans in January - the highest proportion since January 2006 -- up from 69 pct in December.

At the same time, fixed rate deals continued to remain attractive compared to variable-rate deals. The average interest rate of a fixed-rate loan in January was 5.27 pct, up from 5.23 pct in December, compared with the average variable-rate product which reached 5.54 pct, up from 5.36 pct in December.

The number of loans for house purchases fell 11 pct in February from the previous month but compared with a year ago recorded a 6 pct increase.
'Increasing numbers of people - especially first-time buyers - are opting for a fixed-rate mortgage. Each month it seems that the prospect of another interest rate rise is balanced on a knife edge,' CML Director General Michael Coogan said.

'More and more borrowers are protecting themselves against this risk and choosing the certainty of fixing their monthly mortgage payments, which allows them to plan ahead with confidence,' he added.

Source: AFX News Limited