A slump in fixed rate mortgages.

THE number of people opting for fixed-rate mortgages has halved during the past two months, following increases in the cost of the deals.

Mortgage broker John Charcol said only 41.9 per cent of their customers took out a fixed-rate mortgage during August.

That's down from 83.1 per cent in June and the lowest since last December.

The majority of people instead opted for variable rate deals, with 58.1 per cent of the homeowners advised by the group taking out a tracker or discount mortgage.

The shift has been driven by a sharp increase in the cost of fixed-rate mortgages seen during June and July after wholesale funding costs rose.

But although money market rates have since fallen back, very little of the drop has been passed on to new borrowers taking out fixed-rate deals.

At the same time, competition in the variablerate market has increased during the past month, with two lenders launching sub-two per cent deals.