According to new data from the Council of Mortgage Lenders (CML), a record proportion of first-time buyers are opting for a fixed-rate loan in anticipation of hike in interest rates.

London - April 12, 2007: From 82% in January 2006, the percentage of first-time buyers opting for a fixed-rate loan rose to 84% in January 2007. This upward trend continued in the month of February, as the figures reached 87%.

Data for February showed another upward trend - 70% of home movers also took out a fixed-rate deal, compared to 67% in January. And overall, fixed-rate loans accounted for 76% of all loans for house purchase - returning to their all-time high level of 76% in November 2005.

This increasing preference can be attributed to the fact that fixed-rate deals remain attractively priced compared to other products. Since August 2006, the price of fixed-rate deals has increased by just 0.16%. But, discounted, tracker and standard variable-rate products have increased by more than 0.5%.

February's data further revealed that the average rate of interest on a fixed-rate loan in February was 5.34%, up from 5.27% in January; while discounted and variable-rate products reached 5.68% in February, up from 5.54% in the previous month.

According to CML Director General Michael Coogan: "With the chance of at least one more interest rate rise this year, first-time buyers are taking the sensible option of taking out fixed-rate deals, and locking into the payment security they provide."

He further said: "First-time buyers are the most financially stretched group, and the fact that a record number of them are choosing a fixed-rate deal demonstrates their desire to plan ahead and avoid the risks interest rate rises would bring."

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