Britain's poor economic situation has led to house buyers snapping up fixed rate rather than tracker mortgages - despite interest rates for the latter falling, Clear Property Investment has learned.

Tracker deals currently sit at 3.55 per cent compared to 6.32 per cent at the beginning of the credit crunch in summer 2007. Fixed rate deals are sitting at around 5.06 per cent.

In June an analysis of mortgage lending showed 51 per cent of all new mortgages were fixed rate deals while only 30 per cent were trackers.

Jonathan Cornell, of First Action Finance told The Telegraph newspaper: "Borrowers are aware that interest rates are not going to stay where they are forever and are opting for the security of a fixed rate.

"Up until now trackers have been extremely popular, but now there's a move toward fixed rates and so banks are in a position to reduce tracker rates if they choose to and still make a profit."

Louise Cuming, head of mortgages at moneysupermarket.com warned potential borrowers not to be seduced by low rates of tracker mortgages. She said: "Borrowers must take the expected Base Rate rises into consideration right from the start, and make sure that they can still afford repayments when the Bank of England begins to reverse the cuts.

"Anyone thinking about fixing must act quickly. Lenders are increasing rates on an almost daily basis and there is a strong feeling that we have now passed the bottom of the mortgage market."

Meanwhile, with more property coming onto the market house prices are expected to plummet even further.

Ian Perry, spokesman for the Royal Institute of Chartered Surveyors (RICS) described the current housing situation as 'very much like a buyers market.'

"Without sufficient demand property prices continue to slip back," he added.

Only last month estate agents were advising sellers to reduce the price of their property by around ten per cent in order to obtain a sale.

Meanwhile, the new government's Comprehensive Spending Review - which will set out how the government is to tighten its fiscal belt btween 2011 and 2015 - is also expected to have an impact on the housing market with many potential house purchasers nervously awaiting news.

Analysts predict changes in the Review won't really take effect until 2012.

For further advice and information on property investing please contact any of our Investment Team.

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