Homeowners shun long-term mortgages by Finance News Bulletin

Published: 18/10/07

Homebuyers are avoiding lasting fixed-rate mortgages even though the Government believes such deals would be high-quality for hard-pressed borrowers and help to create a more stable property marketplaceThe mortgage marketplace is shifting Get expert help with finding the right contract >> Mortgage adviceIn the Pre-Budget Report, Chancellor Alistair Darling repeated the Government's wish to see more long-term deals

However, there are already plenty of long-term deals with reasonable interest tax - but homebuyers just don't seem paying attentionAccording to Moneyfacts, there are 190 fixed-rate deals with rates guaranteed for ten existence or moreFive years ago, there were only 20 But borrowers can be put off by exit penalties organization into thousands of pounds which can be imposed for the whole 25 years, leaving no suppleness for marriage breakdown, job moves or other lifestyle changes

These also force anyone touching to a bigger home to seek a refill mortgage with the same lender, which might not be the most competitiveThe main thing in their favour is that they avoid the more and more high costs of remortgaging every pair of years Two-year deals by comparison are often cheaper and offer more supplenessJames Cotton, of mortgage broker London & state, says: 'Two-year deals remain by far the most popular

We hardly get any interest in deals of 10 existence or more, even though the rates aren't bad I think borrowers just put on't like thinking that far in front' Nationwide Building Society has a 25-year fixed-rate of 634% (£865 a month on a £130,000 refund mortgage), plus a £599 arrangement charge for homemovers

But over two years it charges 508% for homemovers with a £499 feeA orator for the society claims the 25day deal is 'proving popular', although she admits it has been on offer since July It comes with a 3% punishment if you want to get out during the first ten years

This would be £3,900 on the average £130,000 loan Norwich & Peterborough Building civilization was one of the first to respond to the Government's call for more lasting fixed-ratesIt currently has a 25-year fixed-rate at 638%, which on a £130,000 repayment-loan would price £868 a month

There's a punishment of 6% if you get out before 2017 - £7,800 on a £130,000 loan But it's not advertising well Alison Rolls, of Norwich & Peterborough, says: 'Long-term fixed-rates are not popular They are a place product

'This sight is echoed by Ray Boulger of broker John Charcol 'Long-term fixed-rates are a minority marketplace We know that more than 80 % of those on fixed rates have two-year deals About 2 % or less are on ten-year or longer deals

'steal from Clifford, of brokers Mortgageforce, says: 'Long-term fixedrates will never work because they are against the customer psyche They don't desire to be tied into a lender any more than they want to be tied into a gas supplier'The Woolwich has a ten-year fix at 559%, with a £995 fee and no legal or assessment charges

The monthly cost of a £130,000 25day repayment mortgage would be £805, but the penalty for getting out is 6%But not all long-term fixed-rates are a commitment too distant London & Country's deal (funded by Manchester structure Society) is at 599% for between ten and 30 years

The initial charge of 2% is sheer (£2,600 on a £130,000 loan), but there are no penalties for near the beginning repaymentSurely the fundamental point is that now is almost certainly not a good time to lock into a long word rate I am 2 years into a 20 year fix at 499% and it is the most excellent thing I have ever done, but would I take out a long word fix at 6% or more

Definitely not Unfortunately 2 existence ago the 'experts' were saying that interest rates would come down in 2006 and a lot of people may have missed the possibility to lock into a good long term rate as a resultchoose a loan term 12 months (1 year) 24 months (2 years) 36 months (3 existence 48 months (4 existence 60 months (5 existence 72 months (6 existence 84 months (7 existence 96 months (8 existence 108 months (9 existence 120 months (10 existencePlease choose a type of insurance Life insurance Home and contents Car Breakdown services Health - checkup Health - dental Travel Pet - afflict Pet - cat GOThinking about investing in possessions This is Money has the best buy-to-let information and

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