Over recent months the Chancellor of the Exchequer Alistair Darling has stressed the increasing importance of making fixed rate mortgage for longer periods such as twenty five years available to homeowners in order to improve affordability and stability. Darling recently stated that longer term fixed rate mortgages need to become the norm in order to improve security and stability, and he plans to urge lenders to offer more affordable long term mortgage deals, which he will be addressing at his first budget.
However, despite Darling’s enthusiasm for longer term fixed rate mortgages a recent reports shows that out of ninety lenders only seven are offering mortgages that are fixed for twenty five years or longer. The normal for a fixed rate mortgage is two, three, or five years, with some lenders stretching to ten years. However, longer term fixed rate have not proven too popular in the past, with consumers wary of tying themselves into a particular rate for such a long period of time.
The data comes from a report put together by Mform.co.uk. One official from the firm stated: “Certainty about monthly mortgage payments may be a good thing but borrowers should think very carefully before committing to 25-year fixed rates. The risks are clear. Not only could borrowers end up locked at a higher rate when interest rates are falling but could also find themselves having to pay redemption penalties if they want to move house.”
He added: “It is virtually certain that people’s circumstances will change several times over a 25-year period.”
Following the chancellor’s appeal at his first budget for more lenders to offer longer term affordable mortgages there may be a rise in the number of lenders that are prepared to offer this type of loan, although whether these moans will prove popular with consumers remains to be seen.
Popularity: 37% [?]