Three-year fixed rate mortgages grow in popularity

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by Kay Murchie

According to Abbey Mortgages, in the last six months demand for three-year fixed rate mortgages has tripled.

Research by Abbey claims that one fifth of homeowners would opt for a three-year fixed rate deal compared to 9% who would choose a two-year fixed rate deal while 8% would opt for a five-year fixed rate deal.

According to Abbey, the fall in demand for five-year fixed-rate deals from a high of 22% last month indicates that borrowers are now more optimistic of mortgages remaining affordable over the short-term, probably due to several lenders reducing their rates.

Abbey, which is owned by Spanish bank Santander, also revealed that demand for tracker mortgages has remained steady throughout the year. Research showed that 11% of homeowners would choose tracker mortgage compared to 10% in July.

Abbey, together with Britannia and Woolwich have all cut their rates recently to encourage borrowers back to the market.

The credit crunch has meant borrowers are finding it increasingly difficult to obtain a loan and this has deterred prospective buyers from purchasing a home.

In related news, Woolwich has announced it is cutting rates on its three-year fixed-rate deals by 0.28%.

Furthermore, Abbey has today announced a range of deals with a £499 fee.