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"Not much point" in short-term mortgages

Wednesday, 12 January 2011 12:27 PM

There is little point in taking out short-term fixed-rate mortgages at current rates, according to independent mortgage advisor John Charcol.

Ray Boulger, senior technical manager at the firm, said that most people who choose fixed-rate home loans do so for the peace of mind of knowing they will afford their repayments.

"Frankly if you are going for a fixed mortgage, then I don't think there is an awful lot of point in fixing for two years. When you decide to fix, you would [usually] fix for longer on the basis that you are fixing to get security," he said.

A report from Unbiased.co.uk has shown that the rate at which homeowners would typically be prepared to fix their mortgage is 3.3 per cent, despite the current best-buy deals for three-year fixed loans being 5.1 per cent.

In response to the figures, Boulger said that a 3.3 per cent average rate sounded a little too optimistic, but that it would depend on the length of the contract.

"If people were thinking of a two-year fixed rate, rather than a five-year fixed rate, then 3.3 [per cent] is quite realistic, but it is unrealistic if you are thinking of a longer fixed rate," he explained.

Earlier this month, the Bank of England reported that the number of loan approvals for house purchases increased in November 2010 to 48,019.

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