Paragon Mortgages’ latest Financial Advisors Confidence Tracking (FACT) Index report has found that preference for fixed rate mortgages reached an all-time high in the first quarter of the year.
Between January and March 2017, 89% of mortgages introduced were fixed rate, up 6% on the previous quarter and the highest figure in the survey’s 20-year history. This continues a long-term upward trend that has risen particularly sharply since the end of 2010 when fixed rate and tracker mortgages comprised 46% and 45% of all cases respectively.
In the same seven-year period, tracker mortgages have declined at almost exactly the same pace and in Q1 2017 accounted for just 10% of mortgage business, its lowest ever level.
Two year fixed rates are still the most popular product, despite declining to 48% in Q1 2017 from 53% three months earlier. The most notable shift in Q1 was another increase in popularity of five year fixes, up 3% to 34% of all mortgages.
Following a period of disruption last year, buy-to-let lending stabilised in the first quarter of 2017, accounting for 18% of all mortgages handled, whilst remortgaging remained the most common type of borrowing. In terms of buy-to-let lending, remortgaging accounted for 47% of all business, maintaining a steep upward trend since Q3 2013, whilst lending to first time landlords eased to 15%, continuing a long-term decline from 27% in the same period.
The overall FACT Index rating for Q1 2017 was 93.3, its third fall in succession, reflecting perhaps weaker data that has been observed elsewhere in the housing market, but remains relatively high compared with the last eight years, Paragon said.
John Heron, managing director of Paragon Mortgages, said: “It’s clear to see that the benefit of certainty at such low rates is continuing to drive up the popularity of fixed rate mortgages – particularly five year fixed terms, which gained further ground in Q1 2017.
“The FACT Index gives Paragon a uniquely long-term view, and the ability to measure changing characteristics of the market, particularly in buy-to-let. The widening in favour of remortgages over purchase transactions suggests that supply to the PRS may be coming under pressure which in turn may lead to higher rents.”