Chancellor applauds 25 year fixed-rate mortgage
by Gill Montia

The new Chancellor of the Exchequer, Alistair Darling, has pledged to improve prospects for homebuyers by taking steps to ensure an increase in the number of fixed-rate mortgages available on a 25 year term.
Currently lenders are maximising profits by offering fixed-rate loans on a short-term basis. This means that borrowers are liable for arrangement fees each time a new fixed-rate mortgage is taken out and in some cases the fees amount to thousands of pounds.
In addition, consumers are wary of further interest rate rises and are seeking longer-term fixed-rate mortgages to ensure some financial stability.
Longer-term agreements are less common in the UK than other parts of Europe and three years ago, the Treasury commissioned a review to establish the reasons behind the UK’s lack of long-term fixed-rate products.
Although there have been some changes as a result, mortgage brokers still have financial incentives to advise those seeking a home loan to take short-term products.
The Financial Services Authority has also identified mortgage arrangement fees as a problem in developing longer-term fixed-rate mortgages.
It will no doubt welcome the Chancellor’s statement and in particular his comment that intervention may be necessary to improve the situation.
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