Home buyers get fixed ideas

Homeowners erred on the side of caution by choosing fixed rate mortgages to protect against interest rate rises, according to figures published today.

A Council of Mortgage Lenders survey showed that 71% of mortgages for home purchases and remortgages taken out in April were at fixed rates. This was 2% higher than in March and 17% more than in April last year.

Almost 31,000 loans were taken out by first-time buyers in April, and the average person buying their first home borrowed £106,400 or 3.21 times their income.

That was considerably more than the £94,995 borrowed last year. The average cost of a property for a first-time buyer was £146,248.

However, the proportion of income spent on repaying mortgage interest has fallen slightly to 16.2%, down from 17% in June last year.

Michael Coogan, CML director-general, said the figures showed that the market was "in good shape". The strong take-up of fixed rate mortgages was "encouraging", he said, as they offered consumers confidence and allowed them to plan ahead financially.

Last week, the Bank of England voted to keep interest rates at 4.5% for the 10th month in a row.

However, in May's inflation report the Bank hinted that a rise could be on the cards and many economists are expecting to see interest rates increase before Christmas.

Yesterday, the Department for Communities and Local Government, formerly the Office of the Deputy Prime Minister, said that the average UK property cost £188,290 and that annual house price inflation had hit 5.1% in April.