One of the leading building societies in the UK, the Nationwide, has answered the calls of new Chancellor of the Exchequer, Alistair Darling, by introducing a new 25 year fixed rate mortgage in order to try and make home ownership and stable repayments more of a possibility for consumers in the UK. Mr Darling recently announced that one of the things that he was aiming for in light of the current housing situation with regards affordability was for more longer term fixed rate mortgages to be available.
Not everyone has greeted this suggestion with the same enthusiasm, however. Many experts think that consumers will be very wary about entering into such a long term fixed rate deal and being tied in, as it will work against them in the event that interest rates do start to come down. On the other hand, Nationwide, which has now launched its 25 year fixed rate deal, stated that it ran a similar fixed rate mortgage before, and that this did prove popular.
One mortgage expert stated: ‘Signing up to a long-term fixed-rate deal does offer peace of mind that your repayments will not increase over your given deal period. But it is also in effect a long-term gamble on rates. While you may feel smug as rates rise, if they drop you may be kicking yourself, especially if this persists over a long period of time.’
In light of the recent five interest rate hikes in the past year, with a further one widely predicted in September, it is likely that there will be more interest in these longer term fixed rate deals than there may have been previously. However, despite the government’s enthusiasm over these mortgages some experts warn consumers to think carefully before committing to such a long term deal that could prove expensive to get out of.
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