Low mortgage costs are creating a generation that is 'rate-spoilt'

The average homeowner said they would only be prepared to take out a fixed rate mortgage if it was offering an interest rate of 3.3 per cent, while 16 per cent of people would not fix for anything higher than 2 per cent, according to professional advice website unbiased.co.uk

But in reality, there are only two two-year fixed rate deals with rates of less than 3.3 per cent and one three-year mortgage, all of which require a deposit of at least 25 per cent, while there are no five-year deals available at this level.

In fact, the average interest rate currently charged on a two-year fixed rate home loan is 4.4 per cent, rising to 4.99 per cent for a three-year term and 5.33 per cent for a five-year one.

The group said the current record low base rate of 0.5 per cent had created a "rate-spoilt generation" who had lost touch with the reality of long-term mortgage costs.

When the same research was carried out two years ago, the average person said they would be prepared to take out a fixed rate deal of 4 per cent.

Figures from the Bank of England show that before interest rates began to fall steeply during the final quarter of 2008, the average interest rate charged on two, three and five-year deals was around 6 per cent.

Unsurprisingly, 31 per cent of homeowners said they currently had no plans to remortgage off their lenders' standard variable rate (SVR).

Many borrowers are on SVRs as low as just 2.5 per cent, and mortgage brokers are generally not recommending people remortgage unless they are being charged more than 3.5 per cent on an SVR and have at least 25 per cent equity in their property and a good credit history.