Since he came into office as Chancellor of the Exchequer, Alistair Darling has spoken very highly of long term fixed rate mortgages, and has made it quite clear that he believes that this is the way forward for the UK in order to try and bring stability to the housing and mortgage market, and increase security for homeowners.

Darling has been stating that longer term fixed rates could mean that consumers get to enjoy stable repayments for the majority of their mortgage term, so they would not have to worry about rising interest rates, and he also touched upon how much money some brokers are making by only offering shorter term fixed rates so that consumers keep having to go back to remortgage.

When speaking of his intention to make longer term fixed rate deals more of a norm in the UK Darling said: ‘When you look around the rest of Europe, it is more common to have longer-term fixed rates. We need to look at that. We need to reduce the volatility.’

He also added: ‘Brokers want you to come back every two years, rather than every ten or 20. The Financial Services Authority has identified this as a problem.’

Darling is pushing for lenders to make fixed term mortgage for 20 or 25 years more accessible and affordable for consumers, stating that this could help to stabilise the markets and improve conditions for homeowners. In the past Darling said: ‘For many households, particularly those on low incomes, fixing the level of mortgage repayments for several years makes real sense. It can also contribute to wider macroeconomic stability.’

However, how enthusiastic are people when it comes to fixing their mortgage for such a long period of time? Many industry experts have stated that consumers are loathe to fix their rates for this length of time, adding that some lenders that have introduced such deals in the past have ended up with very little in the way of take up from consumers. In fact, recent figures have shown that last year only 3% of all mortgages taken out were fixed for ten years or longer, as opposed to around 50% in countries such as the United States and France.

Those who are more wary about longer term fixed rates do not feel that the idea will really catch on, as consumers in the UK seem to prefer shorter term fixes of around two or three years.

One industry professional stated: ‘It is extremely difficult to plan for what is going to happen 25 years or even ten years down the line. Borrowers like the idea of long-term stability but don’t want to be trapped for the long-term.’

Another industry professional added: ‘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.’

Recent additions:

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