The prospect of higher interest rates has led a record number of first-time buyers to opt for a fixed-rate loan, according to data from the Council of Mortgage Lenders' monthly survey. 

The data reveals that 85% of first-time buyers chose a fixed-rate deal in January - the highest figure on record - and just over 70% of home movers also decided on a fixed-rate product.

It is encouraging that increasing numbers of first-time buyers are locking into the payment certainty a fixed-rate mortgage provides, as they are the group that are more financially stretched and may suffer most if interest rates go up.

Overall, fixed-rate mortgages accounted for 72% of all new loans in January - the highest proportion since January 2006 - up from 69% in December.

The pricing of fixed-rate loans continued to remain attractive compared to variable-rate deals. The average interest rate of a fixed-rate loan in January was 5.27%, up from 5.23% in December, compared to the average interest rate of a discounted variable-rate product which reached 5.54% up from 5.36% in December.

Today's survey shows an 11% seasonal fall in the number of loans for house purchase and remortgaging taken out in January - 162,300 loans, down from 182,300 in December. But, this was still 6% higher than the 153,600 loans taken out in January 2006.

CML director general Michael Coogan said: "Increasing numbers of people - especially first-time buyers - are opting for a fixed-rate mortgage. Each month it seems that the prospect of another interest rate rise is balanced on a knife edge.” 

“More and more borrowers are protecting themselves against this risk and choosing the certainty of fixing their monthly mortgage payments, which allows them to plan ahead with confidence". 

The Royal Institution of Chartered Surveyors reported it was encouraged that first-time buyers are taking heed of advice warning that the current interest rate cycle has not yet peaked.

RICS economist Oliver Gilmartin, said: “Mortgage borrowers are placing greater value on the security of fixed rate deals and have been further encouraged by the extra money in their pockets as interest rates on fixed rate deals have fallen below discounted mortgages in recent months.”

“However, the housing market will continue to slow gradually throughout the year as higher interest rates bite into the affordability levels of would-be buyers."