Nelson Mortgages

The Chancellor of the Exchequer Alistair Darling has been pushing for lenders to increase the number of longer term fixed rate mortgage deals on offer since he came into office as the chancellor. The series of recent interest rate rises have had a serious impact on affordability for first time buyers and existing homeowners on variable rate mortgages, and the level of repossessions in the UK has rocketed over the first half of this year, as many struggle to keep on top of rising repayments.

Fixed rate mortgages have always proven popular in the UK, particularly amongst first time buyers, but the term over which the mortgage has been fixed has been a short term in the vast majority of cases, such as two, three, or five years. In the past some lenders have offered ten year and even twenty five year fixed rates, but these have never really taken off in the same way that they have in some other countries such as the United States.

However, since Darling’s push for longer term fixed rate deals a number of lenders have started offering fixed rates in excess of ten years. According some reports the majority of consumers are not keen to fix themselves into a particular rate for such a long period and do not want to risk having to pay hefty financial penalties if they decide to break the deal before the fixed rate term ends.

One mortgage expert stated: ‘Two-year deals remain by far the most popular. We hardly get any interest in deals of 10 years or more, even though the rates aren’t bad. I think borrowers just don’t like thinking that far ahead.’

At present two and three year fixed rate remain the most popular amongst those wishing to fix their interest rate initially, and many experts feel that these longer term ones are unlikely to catch on despite Darling’s enthusiasm.

Popularity: 69% [?]