The Chancellor Alistair Darling said in his 2008 Budget last month that he wants to encourage 25 year fixed rate mortgages, and, according to research from FairInvestment.co.uk, the majority of homeowners would go for a long term fixed rate deal.
In his pre-Budget speech, the chancellor said that he wants people to "have the choice of long term fixed rate mortgages because they "protect borrowers from risks and still allow them flexibility to move, or get a new mortgage if rates go down."
However, most UK homeowners have short-term fixed rates of two or three years, which are, according to Mr Darling, "leaving them exposed to interest rate rises when their mortgage deal ends."
"I want to see more flexible and affordable long-term fixed rate mortgages for 10, 20 or even 25 years." he said, emphasising that he intends to investigate how to make a framework that will allow the UK to achieve "affordable, long term fixed rate mortgages". Fairinvestment.co.uk
has found that 37 per cent of people would opt for a 25 year fixed rate mortgage
", and a further 28 per cent would go for a medium term fixed rate deal.
"The fact that the majority of people would go for a long or medium term fixed rate mortgage is reflective of the country's nervousness regarding the current economy and the credit crunch", said James Caldwell, director at FairInvestment.co.uk.
"At the moment, households are suffering from soaring mortgage
", repayments as they come off their fixed rate deals, and some might even lose their homes because they cannot keep up with the payments.
"A long term deal can provide people more security by reducing the risk involved with having a mortgage, which is particularly important for families with low incomes and for first time buyers, who often have no or little equity."
The research also found that some people maintain that a short-term deal is right for them, preferring to live life on the edge and take their chances with the Bank of England base rate; 25 percent said that they would go for a short-term fixed rate, and just six per cent said that they would not choose a fixed rate mortgage at all.
"If the base rate keeps dropping," Mr Caldwell said, "then those who opted not to fix the interest rate on their mortgage will be better off as their mortgage repayments should go down while those on a fixed rate won't benefit. However, if the rate goes up, then those same people could find themselves faced with higher repayments while the more cautious people who opted for a fixed rate deal are protected from such fluctuations in the economy."