Latest sales data from first direct shows that homeowners may be starting to return to fixed rates.

Between 2005 and 2009 fixed rate mortgages were overwhelmingly the most popular type of product, accounting for 64% of all mortgages sold in Britain. In contrast, so far in 2010, less than half (47.6%) of new mortgages have been fixed – according to CML data.

This year’s sales data from first direct is even more extreme, with so far only 25% of mortgages sold has been on a fixed rate and the most popular of these has been the two year repayment version. However, looking at just the last month sales, fixed rate mortgages have increased to one in three.

First direct’s tracker range remain the more popular mortgage choice, but some homeowners are starting to consider how they might fund an increase in the Bank of England Base Rate and are choosing their new mortgage with that in mind. For example, a customer with a mortgage balance of £250,000 who has chosen first direct’s 2.39% Lifetime Tracker mortgage would see their monthly payments increase by £267.38 per month should the Base Rate increase by just 2.0%, compared to no change with a fixed rate loan.

Richard Tolchard, senior mortgage product manager at first direct, said: “The canny homeowner has realised that Britain has been at the bottom of the interest rate cycle for a while and 2011 will be the year when fixed mortgage rates start to move up. Those borrowers keen to stay on a tracker loan need a low flexible mortgage which will allow them to switch out of later in the year with no penalties.”””