Announcing the pre-budget report, Chancellor Alistair Darling admitted that due to market turmoil the government would push for more 10 year and over fixed rate deals.
However, the move was blasted by Louise Cuming, head of moneysupermarket.com, who suggested that the government was out of touch with the mortgage market. She said: "The fact the government is pushing long-term products demonstrates a fundamental lack of understanding of the current mortgage market.
“Longer-term fixed deals may offer some protection against rising interest rates. They may seem an attractive alternative to hunting for a new mortgage every two to three years or an appealing way to avoid ever-increasing fees associated with taking out short-term fixes. However, it is important to understand the risks of locking into any financial product for such a long time, let alone a mortgage.”
Richard Farr, director of the Association of Mortgage Intermediaries, admitted that the government was making strides to improve the housing market, but added that there was little demand for long-term deals in the current market: “We are pleased to see that the Chancellor is slowly reforming his view on long-term fixed rate mortgages. In the past, Darling has said that he wanted 25 year fixed rate mortgages, but today he called for fixed rate mortgages of 'ten years or even longer.’
“In our experience there is little demand for these types of long-term fixed rate mortgages. They have little impact on the number of people getting onto the property ladder and crucially don't help affordability.”
He added: “A number of providers already offer 10 and 25-year fixed rate mortgages. To date they haven't proved very popular.”
Get the daily news delivered to your inbox
Find the latest industry jobs
Register for the next forum
