21 years of fixed rate mortgages

It is now just over 21 years since the launch of the fixed rate mortgage, with Halifax publishing research into the product to coincide with the anniversary.

Fixed rate mortgages were launched in the late 80s by Halifax, and CML figures show that by 2009, 68% of new mortgage lending was on fixed rate products.

Halifax’s research shows that there are over 1,300 fixed rate offers on loan from 69 lenders today compared with 12 fixed rate products offered by 12 lenders in February 1989. 2007 saw the market peak with over 1,500 fixed rate products on offer.

Back in 1989, the Bank of England interest rate was 13%, compared to today’s historic low of 0.50%. Meanwhile, the research shows that the developing market offers people a wider range of products than in 1989, with the difference between the highest available fixed rate today standing at 4.84% compared to 1.05% in 1989.

In the early days of fixed rate mortgages, the standard term was just two years with terms of three or five years occasionally available. Borrowers in today’s market though can fix for up to 10 years, with terms of 1-25 years available.

In February 1989 the average fixed rate stood at 12.55%. In 2007 this had dropped to 6.33%, and today it stands at 5.38%. Halifax offered a rate of 12.75% when they launched the first fixed rate mortgage in 1988. Their highest rate was seen in 1990 with 13.85%, whilst their lowest rate of 1.99% was offered in 2007.

The research also shows that the percentage of fixed rate mortgages typically increases when interest rates are on the rise. But according to the report, 2009 is an exception to the rule, when, despite falling interest rates, an increasing proportion of new borrowers took a fixed rate product.

Stephen Noakes, Mortgages Commercial Director, Halifax said:

“In today’s market, borrowers can select their product based on a number of factors – including the term, type and rate. It’s easy for us to take that level of choice for granted, but before the introduction of fixed rates, borrowers simply didn’t have access to the same options. Ever since their introduction 21 years ago, fixed rate mortgages have been fundamental for homeowners looking for certainty and stability in managing their household expenses, and this is an important milestone to mark.”