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.'

Tom Smith
29th October 2007

Recent News:

• Sharp drop in mortgage lending for September [29.10.07]
  According to the latest figures released by the Council of Mortgage Lenders September saw a sharp drop in mortgage lending, which many experts state is yet another sign that the housing market is cooling down.
  
• One MPC member wanted to cut interest rates [26.10.07]
  The minutes from the last Monetary Policy Committee meeting, which took place at the beginning of October, has shown that one member of the committee voted to actually lower interest rates by 0.25% this month.
  
• Loan companies using aggressive tactics to recover money [26.10.07]
  A recent report has highlighted how some lenders have been using aggressive tactics and below par methods in order to try and recover money owed by customers.
  
• No golden handshake for Ridley [24.10.07]
  Former chairman of stricken bank Northern Rock will not be receiving a golden handshake after resigning late last week.
  
• House prices continue to tumble [20.10.07]
  House prices in certain parts of the UK are continuing to tumble according to a recent report from the Royal Institute of Chartered Surveyors.
• The Rock raises its rates [20.10.07]
  Stricken high street lender Northern Rock has been branded the worst offender in the pool of banks that have raised their unsecured lending interest rates over the past few weeks.
  
• Picture Loans banned from running TV ad [17.10.07]
  Picture Loans, a secured UK lender, has been pulled up by the advertising agency over one of its TV ads, after being accused of making taking out finance sound light hearted.
  
• Barclays cuts it loan rates [17.10.07]
  Major high street bank Barclays has announced that whilst its rivals are busy increasing interest rates on personal, unsecured loans as a result of the credit crunch that has hit the UK it is actually cutting the interest rates on its personal loans.
  
• Consumers prefer fixed rate deals to cheaper tracker mortgages [16.10.07]
  According to the results of a recent survey the vast majority of consumers in the UK would prefer the safety net of a more expensive fixed rate mortgage deal over the uncertainty of a cheaper base rate tracker mortgage, despite the predictions that interest rates may fall in months to come.