UK consumers not keen on longer term fixed rate deals
According to recent figures the majority of consumers in the UK tend to shy away from lender term fixed rate mortgage deals, despite the Chancellors determination to make such deals more commonplace and accessible to consumers in a bid to increase affordability and financial stability for homeowners.
Alistair Darling has been pushing for more lender term fixed rate deals over recent weeks, and although there are now far more of these deals available consumers don’t seem to want to be tied in to a particular rate for such long periods.
Industry officials state that just five years ago there were only twenty long term fixed rate mortgage products on the market, but today this has rocketed to around 190 longer term fixed rate mortgages. However, despite the increased accessibility to these deals, and the effects of five interest rate rises since August of last year, most consumers still prefer to opt for a far shorter fixed rate term such as a two year term.
There are a number of reasons that consumers seem to be shying away from these longer term fixed rates, which can be anything from ten to thirty years depending on the lender. The main downside seems to be the expensive penalty fees charged if consumers wish to come out of the deal early, which means that situations such as relationship breakdowns and other lifestyle changes could pose a big problem.
One industry official stated: 'Two-year deals remain by far the most popular. We hardly get any interest in deals of 10 years or more, even though the rates aren't bad. I think borrowers just don't like thinking that far ahead.'
29th October 2007