According to a study compiled by MoneyExpert.com, while the number of long-term fixed products has risen to cope with greater demand, so too have the interest rates payable on the deals as lenders attempt to reduce their exposure to risky borrowers. MoneyExpert.com found that a borrower can typically pay an initial rate of 6.14 per cent, with some rates hitting 7.59 per cent.
The comparison website showed that that there were 132 individual fixed rate deals of 10 years or longer, which accounted for 11.5 per cent of all fixed deals. This was up on 8.9 per cent of fixed deals in April 2007, where the average interest rate was 5.89 per cent.
Sean Gardner, chief executive at MoneyExpert.com, commented: “Even though there is now more choice for home owners, that choice also comes at a higher cost. Average rates on long-term deals are up, meaning the consequences of making such a big decision are even more severe. If interest rates start to spiral, you’ll be laughing. But if they continue to drop then you could have saved money sticking to shorter term arrangements.”
David Hollingworth, head of communications at London & Country, said there was still a mismatch between what borrowers wanted and what long-term fixes offered. “You have to look at this in context with other fixed rates. You can only compare like for like and there is a danger at looking at averages.
“At the moment, long-term swap rates aren’t any worse than short-term money, so in terms of funding, they are okay. Yet, you still have the issue of locking for the long-term. There is a real mismatch between what borrowers want and what long-term fixes offer. But I think the government recognises that.”
