Housing minister Grant Shapps has called on lenders to offer longer-term fixed rate mortgages of up to 30 years.
At the Building Societies Association’s annual mortgage seminar last week, Shapps said longer-term fixed rates of 25 and 30 years could be popular with borrowers.
He said: “The longest fixed-rate deal currently available is a 10-year deal and beyond 10 years there is nothing. Look at Germany, Scandinavia – fixed-rate deals of 25 years are actually quite common.
“Of course, there are going to be costs and benefits for this and consumers will have to weigh them up. Long-term fixed deals will definitely not be for everyone and I am not proposing that they should. But, for some, the peace of mind of knowing exactly how much money they will have going out of their account each month in the long term will give them the sort of confidence they need to go out and buy.”
BSA head of mortgage policy Paul Broadhead says some societies would struggle to fund long-term fixes. He says: “If you want to fix for the long term, a lender has to get long-term funding to fund that mortgage, which will always have an impact on price. If you can bring pension funds in to provide funding for longer-term fixed rates and there is demand for these products, then you could achieve that.”
London & Country head of communications David Hollingworth says: “Lots of people will not go for longer-term fixed rates because they do not want to lock in for that amount of time, they want more flexibility. And building in more flexibility affects the pricing of the product. I find it hard to see it getting a big take-up.”