Chancellor applauds 25 year fixed-rate mortgage

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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