Darling addresses long term fixed rate mortgages in budget
As promised one of the issues that Chancellor of the Exchequer, Alistair Darling, addressed in his first budget recently was the importance of longer term fixed rate mortgages, which he claims will increase stability in the housing and mortgage sector, and will enable homeowners to enjoy increased security and peace of mind as a result of stable interest rates and repayments through most of all of their mortgage term.
Mr Darling has been pushing for increased availability of longer term fixed rate mortgages for some time, stating that many homeowners could benefit by having fixed rate deals for around twenty or twenty five years. He has been urging lenders to increase the availability of these mortgages at affordable rates, and has now drafted a proposal to put forward to banks and building societies.
Some lenders have expressed concern stating that most consumers in the UK prefer to take out fixed rate deals for two, three, or five years, rather than over a much longer term. Figures show that last year only 3% of total mortgages that were taken out were for fixed rates for ten or more years. In the United States and France, however, the level of long term fixed rate mortgages was around 50%.
Darling stated that looking at the model and popularity of longer term fixed rate mortgages abroad could help to make them more viable, affordable, and popular in the UK.
However, one industry official stated: ‘It is extremely difficult to plan for what is going to happen 25 years or even ten years down the line. Borrowers like the idea of long-term stability but don’t want to be trapped for the long-term.’
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