Fixed rates important to increase stability

Alistair Darling, the Chancellor of the Exchequer, has stated that increased affordability on long term fixed rate mortgages is required in order to help consumers to enjoy greater peace of mind and help bring increased stability to the housing and mortgage markets. Darling addressed the issue about these longer term fixed rates in his recent first budget.

The chancellor has been urging lenders to look at the introduction of longer term fixed rate mortgages at affordable rates, claiming that long term fixed rate deals of 20 or 25 years could mean that homeowners get to enjoy more stability through static repayments for most or all of the term of their mortgage.

In the past consumers have not been over-keen on longer term fixed rates, as they are loathe to tie themselves into a particular rate for too long.

Only 3% of mortgage customers in the UK took a fixed rate mortgage for ten years or longer last year, whereas in the United States and France this figure was around 50%.

One industry official said: ‘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.’