Uncertainty 'undermines the appeal' of fixed-rate mortgages

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Uncertainty 'undermines the appeal' of fixed-rate mortgages

Fri 14th Mar 2008

The government needs to reduce the element of uncertainty to increase the appeal of long-term fixed-rare mortgages, according to financial advice website Moneyfacts.co.uk

It suggests that many people are put off fixed-rate mortgages because of ambiguity over the future direction of both interest rates and their own lives.

Unforeseen lifestyle changes such as a marriage breakdown, long-term unemployment or illness can force homeowners to change their mortgage mid-term, but early repayment fees can be prohibitively expensive.

The website therefore warns that if the government and lenders want to see more people opting for long-term fixed-rate mortgage products, "serious thought should be given to reducing the levels of uncertainty while still protecting profit margins".

It recommends introducing a clause to cover uninsurable life events where the borrower can switch to a more appropriate mortgage without incurring an expensive redemption penalty.

The website's comments come after Chancellor Alistair Darling called for more lenders to introduce 25-year fixed-rate mortgages during his Budget speech.

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