"Until the problems of pricing of long-term products are reconciled with that of making them sufficiently flexible to be attractive to UK home-owners, I cannot see 25-year mortgages becoming a feature of the UK market.
"The issue with long-term fixes reflects a balance between flexibility and cost that most homeowners have to make. At present, the UK heavily incentivises short-termism amongst consumers and it will be difficult to stop the cycle.
"For example, The Cheshire offers a 25-year fix at 5.58%, against the best current 2-year deal at 4.19% from Britannia.
"However, even with deals such as these, the sacrifices a homeowner has to make on flexibility with a long-term deal are too great.
"With currently available products, you are less likely to be able to repay early or increase your borrowings. Additionally, can be problems with the portability of the mortgage when moving home. Whilst these long-term deals are portable, there is no guarantee that you will be able to secure further borrowings should you wish to move home in the future. This could result in having to move to another lender that will entertain higher levels of lending. Under the current structure, that would result in having to pay a penalty."
"Looking ahead, the European Mortgage Finance Agency would appear to be seeking a solution to some of these issues, enabling early-repayment without penalty.
"But guaranteeing penalty-free flexibility comes at an increased price: in this case, products in the region of 6.5%-7% are being mooted. On those terms, compared to current two- and three-year rates, the cost of making long-term products flexible is too great for the consumer to bear."
"This week's announcement will no doubt be watched with interest by David Miles as he compiles his report on the area, but until the price issue is addressed, it doesn't give an answer to all the questions he faces."
Anyone considering getting a mortgage can speak to a Clear Cut adviser by calling 08450 614 592 or logging onto www.clearcutmortgages.com
