Britain’s High Street lenders continue to cut rates on initial home mortgages.  Their focus has been on fixed rates in particular, including most multiple year deals.  Fixed rate loans are at the lowest cost since 2007.  Many borrowers are deciding to jump on board of a fixed rate deal, even though many economists do not see the Bank of England base rate getting hiked for months to come.

According to data from the Council of Mortgage Lenders, more than 65% of all borrowers are deciding to go with a fixed rate mortgage loan, compared with less than 25% who are choosing a tracker rate loan.  This represents more than just a modest change in attitude from 12 short months ago.  During 2010, less than half of borrowers chose a fixed rate product.

A director at Private Finance, Melanie Bien, discussed how many borrowers preferred the certainty of a consistent mortgage payment amount, saying: "Even though the likelihood of an interest rate rise has been pushed back into next year, there are many borrowers who prefer the certainty, particularly when it comes at rock-bottom prices."

The demand for fixed rate products during 2010 compared with this year has changed the pricing lenders charge.  Since demand has spiked the price for fixed rate products has come down significantly and is now in line with variable rate and tracker rate loan products.  During the past few years, fixed rate products have been more costly on average, than most variable rate loans. 

Bien added: "There was a significant gap in pricing between fixed and variable rates earlier this year, but this has narrowed considerably.”