Almost half of mortgage customers (49%) now opt for an initial fixed period of five years or more.
According to Paragon’s latest Financial Adviser Confidence Tracking (FACT) Index which surveys over 200 of the UK’s largest mortgage intermediaries, this figure is up from one in four in 2013.
Two and three year fixed rate products recorded a drop in popularity as a result, with two year fixed rate products falling from 54% of the total in 2013 to 37% in Q1 2019, and three year fixed rate products down from 18% to 12%.
The vast majority of mortgage intermediaries (90%) highlighted low interest rates coupled with concern over future rate rises as the key factor behind the popularity of the five year fix.
Whilst half of mortgage intermediaries felt that increased popularity of the five year fix was neutral for the mortgage market, two in ten (19%) felt it could have negative implications.
In particular, intermediaries were keen to stress that products with a longer term initial fixed period should only be considered by customers who expected to stay in their current home for an extended period. For customers considering a house move, early redemption penalties could outweigh the benefits of a longer term deal.
Paragon managing director of mortgages John Heron said: “The five year fix has found a real sweet spot in the market. Low interest rates, economic uncertainty around Brexit, a drop in home-mover transactions and more remortgaging means that five year products have become a viable option for a much larger proportion of customers.”
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