by Mark Johnston
Long Term Fixed Rate Mortgage Deals!
Back in 2007 the market saw an array of 25 year fixed rate deals, but the deals came at a time when the Bank of England base rate was 5.5 per cent.
The government has therefore once again toyed with the idea of longer term fixed rate as a solution to the housing crisis and they have therefore called on lenders to offer 30 year fixed rate loans to give borrowers certainty.
Melanie Bien, mortgage expert at advisers Private Finance, is doubtful. “Politicians argue that longer term fixes give stability to borrowers and the housing market but when borrowers do opt for fixes they prefer two, three or five year deals.”
In the past few months, Santander, Barclays, Yorkshire and Norwich & Peterborough Building Society all launching 10 year fixed rate mortgages below 4 per cent.
However, as yet no lenders have been so daring as yet as to launch past the 10 year mark but this is perhaps due in part to some of the scepticism that long term deals have been met with in the past.
John Charcol’s senior technical manager Ray Boulger believes long term fixes in the UK could become more prevalent if lenders get the pricing right.
The fact is fixed rate mortgages do offer the certainty of knowing how much mortgage payments will be month after month. The longer the fix, the longer a borrower will know how much they need to cover the costs of a home loan, which is a great aid to budgeting.
Considering that mortgage repayments are one of the largest regular household expenditures, having control over them in this way could be a really benefit.
One benefit of long term deals is having to pay only one arrangement fee.
Andrew Hagger of Moneynet, a comparison website, adds “If you continually chase short term deals and remortgage every two years, you could pay £15,000 in fees in 30 years.”
Another benefit of a fixed rate deal is that the rate never can be increased even if the interest rates for mortgages go through the ceiling.
Although, the Bank of England base rate in the UK is at record lows and many economists do not expect any increases until between 2016 and 2018.
Martyn Smith, of the Legal & General Network, says “careful consideration should be given to future plans and possible life changing events when fixing for a long period.”
Therefore, long term fixed rates tend to be too inflexible for most people, many of whom do not know what they are doing in the next few years, never mind 30 years.
Peter Dockar, head of mortgages at HSBC, says “there is limited consumer demand for long term fix rate deals. We periodically offer 10 year fixed products, but they have only ever accounted for a very small percentage of our total sales.”
Andrew Montlake of mortgage brokers Coreco suggests “Ten year fixed rate mortgages in general have never picked up in the UK as they have in other countries.”
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