Many homeowners will have heard the Chancellor of the Exchequer addressing the issue of 20 and 25 year fixed rate mortgages lately. Alistair Darling is convinced that 25 year fixed rate deals or longer term fixed rate mortgages are the way forward in the UK, stating that their popularity abroad shows just how effective they can be, and adding that they will bring stability to the housing and mortgage markets, as well as providing peace of mind and security for homeowners.

Whilst many homeowners may like the sound of having the same mortgage repayments throughout most or all of their mortgage term, mortgage providers have stated that these mortgages have never proven very popular in the past, with many preferring to stick to two or three year fixed rate deals. Darling states that with this type of longer term fixed rate deal homeowners will not have to worry about rising interest rates and repayment because their rate and repayment will be fixed. However, experts think that consumers are increasingly wary because if interest rates fall they could lose out or may have to pay hefty fees to get out of the deal.

One industry professional stated: ‘While borrowers may enjoy the peace of mind of knowing their monthly repayments will remain the same, their circumstances are almost sure to change and they could pay a heavy price to get out of the deal.’

Another pointed out that consumers on this type of long term deal could experience problems borrowing additional finance, stating: ‘Borrowers who need to upgrade a home and borrow more money should be aware that their lender could refuse to lend them more money or offer it only at high rates. Those on shorter-term deals are free to switch lenders more easily.’

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