UK choosing fixed-rate loans

Fixed-rate mortgages are becoming increasingly popular among homeowners, figures from the Council of Mortgage Lenders (CML) show.

The group's figures show that nearly nine in ten (89 per cent) first-time-buyers chose to take on a fixed-rate package in May, a one per cent increase from the previous month.

Almost three-quarters (73 per cent) of current homeowners also decided to take on a fixed-rate mortgage during the month, compared to 72 per cent in April.

Commenting on the latest data, Michael Coogan, director general of the CML, said that although fixed-rate packages might provide "reassurance" to homeowners, in order to counter interest rate rises, their eventual movement to a variable rate could cause a payment shock.

"Planning ahead for higher payments is as important as the initial decision to shelter from the risk of higher borrowing costs," he said, adding that indebted borrowers should contact their lender immediately if they were having payment difficulties.

However, Oliver Gilmartin, senior economist at the Royal Institution of Chartered Surveyors, encouraged borrowers to appreciate the benefits that a longer terms fixed-rate package could bring.

Mr Gilmartin said that if there was any evidence that inflationary pressures were "persisting", the base rate could be hiked further.

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