Mortgage market 'dominated by fixed-rate products'

The mortgage market is being dominated by fixed-rate products as homeowners capitalise on low interest rates, new research has found.

Legal and General's Mortgage Purchase Index, which tracks trends at thousands of mortgage lenders UK-wide, found a 16 per cent spike in the take-up of fixed-rate products in the second quarter of 2009, compared to the previous period.

In the three months leading up to May, 87 per cent of mortgage customers opted for fixed-rate products.

Stephen Smith of Legal and General said: "Who could blame [consumers]? Margins on these products are high and it's almost a cast-iron certainty that when the base rate next moves, it will be upwards."

He added that these products are offering homeowners "valuable peace of mind" in an often "turbulent" economic climate.

The expert warned that the benefits of fixed-rate mortgages could be able to expire with interest rates now rising.

In keeping with Mr Smith's predictions, Barclays announced this month that rates on fixed-rate mortgages will rise for new customers, from between 0.2 and 0.7 of a percentage point.

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2009-06-29 13:42:29 © Moneyextra.com