Homeowners stuck with high 25-year fixed-rates
It may seem a lifetime ago that politicians were advocating the 25-year fixed-rate mortgage but it was only in July of 2007 that Prime Minister Gordon Brown put forward a plan to provide more long-term fixed-rate loans as a means of controlling soaring house prices.
Chancellor of the Exchequer Alistair Darling reinforced the value of such loans two years ago but those who responded to the call may now be considering paying an average charge of £3,000 to exit this kind of deal.
According to financial website, Moneysupermarket.com, borrowers who opted for a long-term fixed-rate in 2007 will be paying interest at around 5.98%, compared with an average 5.34% on a two-year fix from two years ago.
Rates on today’s two-year fixes are around 4% and Moneysupermarket’s head of mortgages, Louise Cuming, believes events have underlined the danger of locking in so far into the future.
She adds: “the problem for those on 25-year fixed-term mortgages is that the early redemption charge they would pay now is likely to be even higher than the amount of extra interest they would have to pay over the next two years”.