Long-term fixed rates 'would have hampered recovery'

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Long-term fixed rates 'would have hampered recovery'

Wed 2nd Nov 2011

A propensity towards taking out long-term fixed-rate mortgages by UK consumers would have been a bad move in terms of stimulating the UK's economy over recent years, it has been argued.

Ray Boulger, senior technical manager at John Charcol, said had Brits taken long-term mortgage deals in recent years then the benefits of the record-low base rate would not have really been felt by many.

He commented: "When bank rates came down sharply, obviously all of the people on variable rates benefited straight away, but then progressively over the next few years people who were on fixed rates [also] benefited as they came off them."

Mr Boulger added that while the theory that longer mortgages could lead to improve house price stability appears to work in theory. In practice, it is a different matter, as shown by the US market at present.

According to the latest data from the Building Societies Association (BSA), the value of mortgage approvals and gross lending in September 2011 were at their highest level for any month since the BSA started reporting on the current basis in January 2010.

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