.David Bitner, head of product operations at The MarketPlace, Bradford & Bingley, commented:
"Under a new plan announced today, 25-30 year US style fixed rate deals could soon be available to European borrowers without any redemption charges. An exciting concept, were it not for the proposed interest rates of 6.5 to 7 per cent - just too high-priced! With short-term discount and tracker deals in the UK at around 3.5 per cent and short-term fix rates at between 4 to 5 per cent, long-term rates pitched at around 7 per cent would simply be unappealing for the majority of borrowers.
"UK borrowers are used to having choice and competitively priced mortgage deals in what is most probably the most advanced mortgage market in the world - it is difficult to see why they would suddenly want to switch to a higher priced product even if it provides long-term protection.
"The chancellor favours a move towards longer term fixed rates so the economy can be controlled by the use of interest rates without risking boom or bust in the property market. However, until a way can be found to price these products with more attractive rates and no penalties, any plans to make these the product of choice in the UK mortgage market are doomed.
"A typical borrower looking to borrow £100,000 on a repayment basis over 25 years on a fixed rate of 7% for the life of the loan would be looking at paying £706.78 per month. Compare that to a life time tracker at 0.5% above the Bank of England base rate where they would be paying just £541.74 per month, it become startlingly clear what a borrower would opt for."
