Following his recent first budget the Chancellor of the Exchequer, Alistair Darling, is continuing to try and persuade lenders to increase the availability of affordable fixed rate mortgages over the long term, stating that these could help to stabilise the housing market as well as increase security and stability for homeowners.
The chancellor wants to encourage longer term fixed rate mortgages over 20 or 25 year periods, and has even stated that he will take action to make sure that lenders increase accessibility and affordability with these mortgages if they do not do so voluntarily.
Long term fixed rate mortgages have become quite popular abroad, and around half of all mortgages taken out in countries such as France and the United States last year were for deals where rates were fixed for ten years or more.
However, this enthusiasm has not been reflected in the UK, with only around 3% of all mortgages taken out last year being for rates fixed at ten years or longer.
Many lenders are worried that longer term fixed rate mortgages are not going to prove at all popular in the UK, with most consumers looking for maximum fixed rates of between two and five years.
However, these concerns have not put the chancellor off, and he states that these long term mortgages could prove very effective, and that by looking at how long term fixed rates work abroad in countries where they are more popular the UK could also see a rise in popularity in the future.
He said that homeowners will enjoy far greater peace of mind knowing that they mortgage repayments would be the same for most of all of their mortgage term.
However, many industry officials disagree and are convinced that these longer term fixed rate deals will remain unpopular, with one official stating: ‘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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