Will 25 year fixed rate mortgage pose a problem for consumers?

Many experts have been speculating over the problems that 25 year fixed rate mortgage could pose for consumers that decide to take them on, but this is not something that the Chancellor, Alistair Darling, seems to be concerned about.

Over recent months the Chancellor has been pushing for 20 and 25 year fixed rate mortgages to become more affordable and accessible for consumers.

Darling stated that these longer term fixed rate deals could provide peace of mind and security for homeowners, as well as providing increased stability to the housing and mortgage markets.

However, one industry official said that whilst these longer term fixed rate deals were portable, consumers could find it difficult if they needed to borrow more money on top.

He said: ‘Borrowers who need to upgrade a home and borrow more money should be aware that their lender could refuse to lend them more money or offer it only at high rates. Those on shorter-term deals are free to switch lenders more easily.’

Another industry official said that trying to get out of this sort of deal could prove costly to the consumer, adding: ‘While borrowers may enjoy the peace of mind of knowing their monthly repayments will remain the same, their circumstances are almost sure to change and they could pay a heavy price to get out of the deal.’