Budget 2008: Mixed welcome for long-term mortgages
Alistair Darling's move to promote long-term mortgages as a way of adding stability to the property market has met with a mixed reception.
Currently the market for fixed-rate mortgages lasting over ten years is limited and take-up has been muted.
Buyers who have opted for long-term mortgages tend to see benefits as they can budget for longer and do not face repeated fees when remortgaging.
However, homebuyers have been turned off long-term mortgages by the lack of flexibility they offer.
Matthew Carter, Nationwide director of mortgages, said: "We know a 25-year deal may not appeal to everyone but at the moment it is something our members want us to offer.
"Some customers want the security and peace of mind of a 25-year fixed rate mortgage, knowing they will be unaffected by fluctuations in rates. And with just one reservation fee to pay, borrowers could save thousands of pounds on fees compared to taking several shorter term deals."
Nici Audhlam-Gardiner, Abbey director of mortgages, called on the government to be realistic demand for long-term mortgages.
"While it may be true that the market could benefit from a slightly longer-term outlook than its current two-year cycles, our customer insight tells us that 25 years is too long for most people to fix into a mortgage.
"We're finding at Abbey that people's horizons are lengthening - with five-year fixes becoming increasingly popular - but 25 years is still very niche."
She added: "So much can happen in a quarter of a century, both to a customer's circumstances and to the economy. So while these very long-term deals may be suitable to provide long-term stability for a small number of customers - they will not be suitable for all."
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