25 year fixed-rate deals win support

Friday, 4 April 2008 8:37 AM

Longer term mortgages have been given a vote of support by borrowers amid frenetic mortgage market conditions.

According to research from the Fair Investment Company (FIC), some 37 per cent of borrowers would consider selecting a 25-year fixed-rate deal when choosing their mortgage.

Furthermore, an additional 28 per cent could be tempted to plump for a medium term fixed-rate deal.

The news follows recent endorsement of such products by chancellor Alistair Darling, who criticised the present shorter-term deals on offer.

Presenting his first Budget in March, Mr Darling said: "Today most people in the UK have short-term fixed rate mortgages for two or three years, 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 ten, 20 or even 25-years."

However, the research also found a minority maintain 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.

Some 25 per cent of respondents 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.

"The fact 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."

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