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Tuesday, April 30, 2019

5yr fixed more popular than ever

  • Almost half of mortgage customers (49%) now opt for an initial fixed period of five years or more
  • Five year fixed rate mortgages double in popularity
  • Low interest rates and desire for cost certainty are key factors influencing customer behaviour

More customers than ever are opting for an initial fixed period of five years or more when choosing a mortgage according to Paragon’s latest Financial Adviser Confidence Tracking (FACT) Index which surveys over 200 of the UK’s largest mortgage intermediaries.

According to the survey, almost half of all mortgage customers (49%) now opt for an initial fixed rate period of five years or more when selecting a mortgage, up from one in four (25%) 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. Customers’ preference for long term certainty on payments was also highlighted as important (76% of intermediaries).

Whilst half of mortgage intermediaries (50%) 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.

Intermediaries did not forsee any immediate catalyst to disrupt the popularity of the five year fix. A more stable economic climate post-Brexit was the factor highlighted as most likely to lead to an interest rate rise and reduce attractiveness (56% of intermediaries).

John Heron, Managing Director of Mortgages at Paragon 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.”

View the full FACT Q1 2019 report at

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