Lender GMAC-RFC is dropping its 25-year fixed rate mortgage product after just two months on the market, blaming a lack of interest from borrowers.
GMAC-RFC offered the loan at 5.49 per cent but, despite an enthusiastic launch, marketing director Jeff Knight says the product just did not pick up enough interest.
The company says swap rates moving upwards finally persuaded it to abandon the product rather than reprice it.
GMAC's departure leaves Leeds & Holbeck and Cheshire Building Society as the only players with 25-year fixes in the market. Both have said that they have no plans to withdraw these projects from the market.
The decision deals another blow to Chancellor Gordon Brown's vision of creating a market for longterm fixed-rate mortgages in the UK to bring it in line with other European countries.
Knight believes that long-term fixes may never take off in the UK. He says that most borrowers are still looking for more flexibility and are afraid of being locked into long-term deals.
He says: “This was a market test. There was only one way to find out about the appetite for long-term fixes and we have taken the view that the market is just not ready at the moment.”
London & Country mortgage specialist David Hollingworth says: “I think this shows that barriers remain and there is no easy answer for long-term fixes. UK borrowers are just not interested in looking at longterm products. They want flexible arrangements and the whole market has moved in this direction.”