Don’t get stuck in a long-term fix
Chancellor Alistair Darling says he’s all for long-term fixed-rate mortgages, and he wants lenders to offer more with terms upwards of ten years.
Whose side is he on?
The only people certain to benefit from these notoriously uncompetitive and restrictive deals are the lenders who trade on people’s nervousness about rising rates to cash in with high interest charges and outrageous early repayment penalties.
There’s a reason why lenders offer relatively few deals with terms of ten years and above – it’s because most people recognise there’s little advantage to tying yourself in for this length of time.
Lisa Taylor, an analyst at Moneyfacts.co.uk, says: ‘Signing up to a long-term fixed-rate deal does offer peace of mind that your repayments will not increase over your given deal period.
‘But it is also, in effect, a long-term gamble on rates. While you may feel smug as rates rise, if they drop you may be kicking yourself, especially if this persists over a long period of time.’
She adds: ‘If you need to unlock from the deal, or house, for any reason, then you must remember there will often be some hefty redemption charges to pay.’
And that’s exactly why most borrowers prefer to choose deals of between two and five years, Mr Darling.
