The proportion of homebuyers applying for a fixed-rate deal fell to its lowest level in almost two years in September, according to Mortgage Advice Bureau’s latest National Mortgage Index.

Despite an anticipated interest rate rise in 2015, only 92% of September’s purchase applicants opted for a fixed-rate product. This represents an annual fall of 2% from September 2013’s average of 94%, and the lowest proportion seen since November 2012 when just 90% chose to fix.

Fixed rate products suffered a similar decline in popularity among remortgagers last month, with 89% of existing homeowners remortgaging onto a fixed rate deal compared to 92% a year ago (September 2013).

The reduced popularity of fixed rate products among consumers coincided with strong price competition between lenders over tracker rates. Using data from Moneyfacts, the Index shows while two year fixed mortgage rates have risen steadily during 2014, two year tracker rates reached their lowest level (2.63%) in September since the Index began recording this data in June 2007.

In contrast, two year fixed rates reached their highest average (3.78%) in 16 months, since they were priced at 3.82% (May 2013). There is now a 1.08% gap between two year tracker rates and the next most affordable option: a three year fixed deal.

September also marked the first time since May 2008 that three year fixed products were cheaper than two year fixes.

While offering greater financial security should interest rates rise, five year fixed rates have been above 4% for seven consecutive months, and at 4.16% are now considerably higher than shorter-term options.

Mortgage activity made a significant turnaround in September, with total mortgage applications up 13% in a month, having dropped 18% in August in the traditional summer slump. Year-on-year, total applications in September were up 26%.

Remortgage applications led this charge, rising by 20% in a month compared to 10% for purchase applications. Annual comparisons demonstrate a similar pattern, with remortgages experiencing a 35% rise in applications compared to 23% for purchases.

Mortgage Advice Bureau said its recent Remortgage Report suggests this trend will continue as rising house prices and higher interest rates prompt homeowners to reconsider their current deal.

Brian Murphy, head of lending at Mortgage Advice Bureau, said: “The question of interest rate rises is not an ‘if’ but a ‘when’. That being said, the Bank of England has made repeated assurances that interest rate rises will be gradual, and this seems to have filtered through to some consumers, who are willing to opt for variable mortgages to take advantage of lower pricing.

“Once interest rate rises become a reality, we may well see consumer preference swing back to longer-term fixed rate products which guarantee a set rate. Buyers who are unsure on their product choices should consider speaking to an independent mortgage broker, who can assess their situation and provide guidance on the best option for them from across the market.

“Now is an ideal time for existing homeowners to check whether their current mortgage is still the best deal: acting fast before interest rates rise could prove beneficial in the long-term. It is likely we will see the recent boost in remortgage application numbers reflected in lending figures over the coming months as lenders respond to growing demand.”