Chancellor thinks longer term fixed rate are the answer
October 25, 2007
Affordability when it comes to buying property in the UK has diminished over recent years, with a combination of rocketing house prices and higher interest rates affecting consumers’ ability to purchase property.
For those that are already on the property ladder the series of five interest rate hikes in the space of a year have taken their toll, and have made it a real struggle to keep up with rising mortgage repayments for many homeowners on variable rate deals.
In addition to this further concern is mounting over the number of homeowners that were on low, short term fixed rates for two or three years, and are now due to come off their low fixed rate and see their interest rate shoot up to the lender’s standard variable rate, which in some cases is in excess of 8%. This could mean adding hundreds of pounds to the cost of the monthly mortgage repayment in some cases, and could add to the already increasing level of repossessions in the UK.
Chancellor of the Exchequer, Alistair Darling, thinks that longer term fixed rate deals are the solution to these problems, and is continuing his call for increased access and availability when it comes to long term fixed rate deals, including deals that offer fixed rates for the whole term of the mortgage, which means that consumers’ interest rates and repayments would remain exactly the same over the term of the loan no matter what happens with the base rate.
These longer term fixed rate deals have not previously taken off in the UK, although a number of lenders have offered them in the past. However, following Darling’s initial call for action on this issue a number of lenders have started to offer these long term fixed rate loans again. The Council of Mortgage Lenders has stated that in order to improve the popularity of this type of mortgage deal the government needs to “stimulate mainstream consumer appetite”.
Alan Wright
25th October 2007
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