Fixed-rate deals 'dominating new business'

Nearly three-quarters of new residential mortgages in the first three months of 2009 were fixed-rate deals, new research has revealed.

The study by Legal & General has found that during the first quarter of this year, 72 per cent of mortgages for owner occupiers have been fixed-rate products, compared with 65 per cent in the fourth quarter of 2008.

Over the same period the proportion of such mortgages being taken out for buy-to-let purposes rose from 43 per cent to 68 per cent.

The firm noted that the average two-year fixed rate has dropped to 4.78 per cent from 5.9 per cent in the third quarter of 2008, with the three-year average dipping from 6.3 per cent to 5.41 per cent.

Commenting on the findings, director of housing at Legal & General Stephen Smith stated: "Fixed rates are very much back in favour, partly because lenders have been increasing the margins on their new tracker mortgages."

The best two-year deals for fixed-rate mortgages are now half as expensive as they were last summer, Mail Money expert Liz Philips stated in the Daily Mail.

A reduction from an average of six per cent to three per cent would mean a £150,000 mortgage costing £280 less a month, she said.