The minister said that longer-term products will ensure that people know where they stood as they would give consumers greater certainty over the costs of buying a house in the long term and allow families on tight budgets to know exactly how much they will be paying for their home in the future.
He said: “In today’s uncertain world, people want to know where they stand. Yet when it comes to buying a home, there are no mortgages available for them where they can fix their payments for a long time. The longest fixed-rate mortgage for many is five years.
“Longer term mortgages, possibly as long as 30 years, could help families on tight budgets know exactly where they stand when they’re buying a home, by giving them greater certainty over how much they will be paying for their home in years to come.
"While they won't be right for everyone, lenders should start to look at the case for 30-year mortgages and how we can move to a more stable housing market where first-time buyers can get their first foothold on the property ladder at a cost they know they can afford."
Shapps also argued that government wanted to see stability in the housing market and that long-term products coming on stream could help deliver this, alongside the ongoing deficit reduction efforts and the Financial Services Authority’s Mortgage Market Review.
Paul Broadhead, head of mortgage policy at the Building Societies’ Association, said: “We welcome the prospect of an inclusive debate on any measures which will help lenders lend and consumers borrow. We also endorse the Government's aim for a stable and we presume active housing market.
“Longer-term fixed rate mortgages have been offered in the past but with limited consumer demand. Ten-year rates are currently available and lenders do respond with new products where demand exists.
“The challenge with fixed rate mortgages is always the balance between price and flexibility for the consumer. The more flexible a fixed rate is the more expensive it is for lenders to fund with the knock-on higher cost to consumers. We are keen to hear more about the Minister's ideas on new sources of long-term market funding.
“We would certainly not advocate a 'one-size fits all approach' to mortgages. It is right for lenders to offer a range of products which suit the different needs of individual consumers”
Peter Dockar, head of mortgages at HSBC, said: “This is not the first time the issue of longer-term fixed rates has been raised - the Miles report in 2004 made similar recommendations.
“In our experience there is limited consumer demand for mortgages fixed for their term. We periodically offer ten year fixed products, but they have only ever accounted for a very small percentage of our total mortgage sales.
“However, there is certainly an appetite to fix for five years, which is why we currently offer market leading five year fixed rates for customers with deposits from 10%.
“To move beyond ten years presents additional costs to lenders which would be reflected in more expensive mortgage rates for those customers who do want long term certainty on their mortgage payments. So on this basis, it's very positive to hear the Government is keen to look at new ways to fund longer term mortgage deals.”
