Tracker mortgages are seeing a boom in popularity, suggesting that homeowners and buyers are increasingly confident that interest rates will fall in the near future.

According to the Council of Mortgage Lenders, tracker mortgages have become increasingly popular of late, overtaking fixed rate loans. Fixed rate mortgages now account for the smallest proportion of the market (52 per cent) for over three years.

Floating rate products, where the interest charged falls as rates fall, could continue to rise in popularity if the current liquidity crisis subsides.  If it does, banks are likely to begin shadowing the Bank of England's base interest rate more closely. Since many analysts are predicting slow but steady falls in interest rates over the course of 2008, any mortgage that follows these reductions will be a popular option.

The CML data also show that in February of this year, first time buyers borrowed an average of 88 per cent of the property's value, with repayments standing at exactly 3.33 times their income, while home owners in the process of moving typically borrowed 71 per cent of their new home's value at a cost of 2.97 times their annual income.

Commenting on his organisation's data, CML's Michael Coogan said: "The trend away from fixed-rate products continues as expectations of further Bank base rate reductions, probably starting this week, have increased. The February figures relate to completions of transactions started several months ago. More recently, there has been consistent evidence of tightening in lending criteria which will lead to shrinking pipelines of new business as the recent Bank of England's credit condition survey made clear. We expect this process of further tightening in lending criteria to continue in the second quarter as lenders respond to the challenging market conditions."