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More than half of first-time buyers are opting for longer-term mortgage deals as interest rates look set to rise sooner than expected.

Research from Accord revealed 51 per cent of first-time buyer applications in January were for five-year fixes, compared to just 20 per cent a year ago.

At the same time, two-year fixed deals accounted for just 48 per cent of applications in January, down from 63 per cent in the same month last year.

Rachel Lummis, mortgage adviser at Xpress Mortgages, said: “The most popular initial period for a fixed rate has historically been two years – these always have the lower rate – but five-year fixes have increased in popularity recently.

“These deals have become competitive and that, coupled with talk of interest rates rising sooner, means some buyers are tying in for longer to give them stability for the first five years of ownership.”

Accord, the buy-to-let arm of Yorkshire Building Society, also reported that first-time buyer deposits had increased over the past year, with more buyers opting for 85 per cent loan-to-value products.

The Government’s decision to scrap stamp duty for first-time buyers on homes worth up to £300,000 is widely believed to have ramped up demand in this part of the market.

Ben Merritt, mortgage manager at Accord, said: “Our data shows first-time homeowners are making canny decisions about the type of home loan they choose, such as opting for longer terms, which reflects the advice brokers are likely giving.”

A growing number of buyers are using a mortgage broker for their purchase. Lending through intermediaries as a share of the market grew to 77 per cent in 2017 from just 53 per cent in 2012.

Ms Lummis added: “The major of mortgages are portable, which means first-time buyers can opt for a five-year team but still be able to move up the ladder, and that is a strategy we are increasingly seeing.”

Source: FT Adviser

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