Brits show lack of commitment for long-term mortgages

19 October 2007
In his pre-budget report, the Chancellor suggested that lenders should offer a greater selection of long-term fixed-rate mortgages of ten years or more.

However, despite the fact that the number of offers in this bracket has increased from 20 in 2002 to 190 this year (according to Moneyfacts.co.uk), it seems people in the UK are hesitant about making such a long-term commitment when it comes to mortgage deals.

Mr Darling suggests long-term fixed-rate deals could be a way of stabilising the property sector as the knock-on effects of the sub-prime crisis continue to surface, as well as giving “consumers greater certainty of their regular mortgage payments”.

However, although long-term deals can help homeowners avoid remortgaging costs when short deals come to an end, they can also offer less flexibility as well as less competitive prices. People are often wary that long-term deals will prove problematic in the instance of relationship breakdown or unforeseeable changes in circumstances.

National sales manager from Standard Life Bank, Will Fraser, said that one-fifth of UK home owners rolling off short-term deals now want a longer-term deal; however, they are not interested in 25-year mortgages. The group’s research revealed that just two per cent of clients were asking Independent Financial Advisors (IFAs) about fixed-rate, 25-year mortgages.

More than three-quarters (76 per cent) of IFAs questioned by the company did not think 25-year fixed rate mortgages were a good idea, citing inflexibility as one of the key reasons, while one in ten (11 per cent) thought they were simply a “knee jerk reaction in a rising rate environment,” according to Mr Fraser.

The company has just launched a new mortgage product, the Freestyle Term Tracker, which “is designed to appeal to home owners who want long-term certainty about their monthly payments, while still having the benefits of a competitive product”.

Despite these statistics, Fair Investment Company has seen fairly consistent inquiries for long-term fixed-rate deals over the last nine months. Although total mortgage inquiries fell 33 per cent in September compared with January, fixed-rate deals for ten years or more still accounted for 46 per cent of all mortgage inquiries compared with 49 per cent in January. Month-on-month inquiries for this mortgage type fell just 2 per cent.

Find out more about fixed-rate mortgage rates, Standard Life Mortgages and use our free mortgage calculator

© Fair Investment Company Ltd