Over half of Britons would not consider a long-term fix and fewer than one in four would think about taking out a 25-year mortgage according to figures announced by Abbey National Building Society.
The survey of over 1000 Britons commissioned by Abbey indicates that despite a new government initiative which aims to encourage mortgage holders to take out long term fixed mortgages as a solution to increasing mortgage rates and extortionate house prices is proving unpopular.
Currently short term offers and rising interest rates encourage lenders to change their mortgage when their current deal expires, meaning borrowers incur fees if they decide to swap mortgages or settle early.
Reasons given for not wanting to take out such a lengthy mortgage include the uncertainty about what the future holds (27%) while 18 per cent thought that they’d miss out on better deals if interest rates fell. Also, it seems that many people intend to pay off their mortgages within a 25 year period so a long-term fix would not be suitable for them.
“It is clear that the public don’t have much of an appetite for 25-year mortgages,” explains Sue Hayes, Director of Abbey Mortgages. “This is borne out by Abbey’s own experience - we have launched 25-year mortgage products in the past - all of which had limited demand. We continue to see increasingly strong demand for our five and 10 year fixed deals, indicating that 25 years is just a step too far.”
Further insights showed that an overwhelming 86 per cent of those who would consider a fixed rate mortgage felt that it gave a certain amount of security regarding the up front costs. 48 per cent thought a 25 year fix would be attractive because they believed interest rates would keep rising. Over a third (37%) claimed it would save the hassle of remortgaging, while 26 per cent would consider it to avoid paying switching fees.
“Given the great cultural and economic changes we’ve seen in the past 25 years, this is not surprising,” continues Sue Hayes. “Few people are prepared to commit themselves to a deal for a quarter of a century.”
Nationwide also launched a 25-year fixed rate mortgage earlier this year only to withdraw it five weeks later due to lack of interest from borrowers.
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