Over 54 per cent of borrowers would definitely not take out a 25-year fixed rate mortgage despite the Government’s plans to increase the amount of long-term rates offered.
Research by Abbey shows that only 23 per cent of the 1000 people it interviewed last weekend would consider a 25-year fixed rate mortgage.
Of those who wouldn’t take out a 25-year fix, 27 per cent claimed they would not want to be locked into a mortgage for that length of time. A further 27 per cent claimed that the uncertainty of the future would put them off, while 18 per cent felt that interest rates would fall – and they would miss out on better deals.
Another key theme that emerged was that around a quarter of people planned to pay off their mortgage within 25 years.
Of those who would consider a fixed rate mortgage, the overwhelming factor – for 86 per cent – was the security of knowing up front costs. 48 per cent thought a 25 year fix would be attractive because they believed interest rates would keep rising. 37 per cent claimed it would save the hassle of having to remortgage, while 26 per cent cited avoiding switching fees as an attraction.
Abbey director of mortgages Sue Hayes says: “It is clear that the public don’t have much of an appetite for 25-year mortgages. This is borne out by Abbey’s own experience – we have launched 25-year mortgage products in the past – all of which had limited demand.
“We continue to see increasingly strong demand for our five and 10 year fixed deals, indicating that 25 years is just a step too far. Given the great cultural and economic changes we’ve seen in the past 25 years, this is not surprising. Few people are prepared to commit themselves to a deal for a quarter of a century.”