Brits Shown To Be Seeking Long Term Mortgage Deals
An increasing number of homeowners appear to be taking steps to safeguard their spending, according to new research.
In a study carried out by MoneyExpert, it was reported that more consumers are looking to obtain a fixed-rate mortgage deal which lasts for at least ten years. At present, it was stated that those borrowing products with contract terms of at least 120 months now account for 15 per cent of the fixed-rate market. Such a proportion reflects an increase from the eight per cent taken up this time last year. The increasingly popularity of such deals was attributed to efforts - both by would-be borrowers looking to get on to the property ladder and loan lenders - to manage in the current climate of financial turmoil.
By determining how much of their income goes towards mortgage repayments each month, it may be possible that borrowers can manage other constraints on their finances - such as personal loans and credit cards - with greater ease.
In addition it was reported that there are a total of 18 25-year fixed-rate deals currently on offer, an increase from the nine noted in July 2007.
Although the number of long-term mortgage deals available was indicated to have grown from 127 to currently stand at 137, the price comparison website showed that the overall mortgage sector has contracted. Such borrowing products were reported to have fallen by 41 per cent over the last 12 months.
Commenting on the figures, Sean Gardner, director of MoneyExpert, said: “The credit crunch has prompted a flight to safety by borrowers who have been stung by dramatic rises in the rates on short-term deals. At the same time lenders are increasingly keen on signing customers up to long-term deals which offer them certainty. Long-term fixed-rate mortgages are no longer an oddity. And with competitive rates of interest in some circumstances they may well be worth considering.”
However, Mr Gardner warned that by opting for a long-term fixed-rate mortgage deal, consumers could well find that they are hit with more expensive redemption charges than if they chose a short-term borrowing product. As an example, it was stated that those on a 150,000 pound mortgage may have to pay some 19,500 pounds - the equivalent of 13 per cent of the mortgage - in order to get out of the deal. But with the typical interest rate on a long-standing fixed-rate deal currently at 6.56 per cent, compared to the market average of 6.9 per cent, opting to fix interest rates for a substantial period of time could be “a worthwhile long term strategy”.
During the current period of financial turmoil those looking for an effective way in which to manage mortgage payments and other monetary demands may also want to consider getting a cheap loan. By doing so, borrowers may be able to meet various spending commitments quickly leaving them with a single affordable repayment to make each month. Meanwhile a study by FairInvestment in April indicated that more than one in three homeowners (37 per cent) would be willing to take out a 25-year fixed-rate mortgage deal.
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