Over 50% of first-time buyers are now taking fixed-rate mortgages according to Clear Cut Mortgages, and in the light of predictions of interest rates peaking soon, this shows affordability is being stretched, says the firm.

The Council of Mortgage Lenders (CML) reported that fixed rate lending accounted for 38% of all new mortgage lending in July, up from 34% in June, however Clear Cut Mortgages have analysed data from calls received over the last 6 weeks and report a number of trends including the need for many borrowers to seek the protection of fixed rate products.

Ben Thompson, Sales & Marketing Director said: "Only serious buyers remain active in many regions across the UK and it is clear that for first time buyers making that first leap it is expensive and represents a significant commitment."

"Over the last few weeks we have seen over half of all first time buyers take a fixed rate and this reflects the fact that affordability has become stretched."

Interestingly, CCM have also seen nearly half of callers looking to buy for investment purposes seek the security of a fixed rate as well, presumably, the firm says, to in effect lock in some degree of certainty around return on investment, or monthly yield. At the same time, existing and experienced landlords have looked towards switching onto discounted rates as a means of improving their yield, as rates on average are over half a per cent cheaper on a discounted basis.

For those that have owned a home for some time and have built up a decent level of equity over the last few years affordability tends not to be such as issue. Thompson says: “Although the CML data points towards an increase in fixed rates overall, we have seen many callers looking at switching their mortgage, opt for a discounted rate of some description."

"This is typically due to the fact that discounts represent good value for money for those that are prepared to take a bit of a punt on where interest rates are likely to go, for example over a 2 year period rates would have to rise significantly and quickly for a fix to represent value for money”.

With rates largely predicted to peak in early 2005 and possibly fall a little towards the end of next year, it will be a while before many buyers across various regions of the UK are comfortable to make that first step onto the property market.

For existing borrowers, it is now possible to see some sort of an end to interest rate hikes, and now ought to be a good time to switch to a discounted product to reduce monthly outgoings.

Landlords will no doubt see more demand from tenants as renting becomes comparatively cheaper, certainly in the short to medium term.