According to its Mortgage Purchase Index for the first quarter of 2009, Legal & General says that 72 per cent of residential borrowers opted for a fixed rate mortgage, compared to 65 per cent in the last quarter of 2008.

The buy-to-let mortgage sector also saw a rise in the popularity of fixed rate deals from Q1 2009 to Q4 2008, with 68 per cent of customers opting to fix their interest rate, up from 43 per cent in the previous quarter.

Just 30 per cent of borrowers chose a variable rate mortgage in the first quarter of this year, compared to 56 per cent in the last quarter of 2008.

The analysis from L&G; suggests that borrowers do not expect the Bank of England to cut interest rates much further. They are already at a record low of 0.5 per cent, and some lenders have brought their rates down accordingly, lowering the cost of fixed rate mortgages.

The average cost of a two year fixed rate mortgage was 4.78 per cent in Q1, down from 5.90 per cent in Q3 2008, while the average three year fixed rate mortgage is down from 6.30 per cent to 5.41 per cent.

“Since we started producing these reports in early 2008, the popularity of fixed rates has swung wildly,” said Stephen Smith, director of housing at Legal & General. “Fixed rate pricing has only really stared to come down in the past few months, and even then only for those borrowers with a hefty deposit.

“The gap between what you’d pay with a 40 per cent deposit compared to what you’d pay with a five per cent deposit is still significant. However, fixed rates are very much back in favour, partly because lenders have been increasing the margins on their new tracker mortgages.”

Mr Smith added that the challenge facing mortgage advisers now is convincing a borrower on a low SVR that remortgaging to a higher fixed rate is a good idea as it will “insure against the inevitable rate increases which the Bank of England will instigate at some point to combat the threat of inflation.

“This all understandably seems a very long way off for the average homeowner,” he added, “but is worth thinking about.”

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