Borrowers opt for tracker mortgages over fixed-rate deals

According to Paragon Mortgages’ Financial Adviser Confidence Tracker, a panel-based survey of mortgage brokers, the proportion of mortgage borrowers opting for a tracker mortgage has overtaken fixed-rate deals for the first time in a year, suggesting that borrowers believe interest rates will remain low for some time.

Tracker mortgages accounted for 51% of broker’s residential mortgage business during Q1 of this year, up from 45% in the final quarter of 2009.

The proportion of fixed-rate mortgage business declined from 46% to 43%. This was the first time the proportion of fixed-rate business dipped below tracker business since the first quarter of 2009, and was the lowest level of fixed-rate mortgage business since the final quarter of 2008.

Of those opting for fixed-rate mortgages, two-year deals are the most popular with more than eight out of 10 (84%) brokers ranking them as first or second in terms of popularity, and more than six out of 10 (63%) classing them as the most popular. Three-year terms were the second most popular with borrowers.

Least popular were rates fixed for the full term, with just 2% of respondents ranking them as most popular and almost half (49%) ranking them as least popular.

John Heron, Managing Director, Paragon Mortgages’, said:

“The proportion of borrowers opting for tracker mortgages has been growing since last summer as borrowers look to take advantage of low interest rates. Although there are some good fixed-rate deals available, the average rate on fixed-rate deals is still significantly higher than the Bank of England’s interest rate, and they are becoming less popular with borrowers. It also appears that borrowers believe that Base Rates will remain low for the foreseeable future.”