Long-term mortgages to 'increase in popularity'

Prospective British homebuyers are to increasingly look towards long-term, fixed-rate mortgages as opposed to the traditionally popular short-term deals, according to Ben Wilkie.

Mr Wilkie, the editor of What Mortgage, has explained that longer five and ten-year mortgages are becoming more attractive because the economy suggests that the British public will not be receiving any drastic pay increases in the near future.

Long-term rates have been popular in other countries, but never in the UK.

"I think it is just the culture of the market. In the past, a lot of mortgages have been sold through brokers and they like having short-term deals because they get to sell a new mortgage every couple of years," says Mr Wilkie.

There is a lot more competition among mortgage providers in the UK, which encourages customers to shop around a lot more to find the best deal. This has meant that buyers are less likely to want to stick with the same provider for an extended period of time when they can use the vibrant market to improve their existing deal.

This prediction comes just a week after the lowest ever ten-year mortgage, which was fixed at 3.99 per cent, sold out.

The mortgage, which was offered by Norwich and Peterborough Building Society, only lasted two weeks on the market due to the overwhelming demand.

Yesterday, the Post Office further encouraged the trend by announcing that it had cut its five year, fixed-rate deal at a 75 per cent loan-to-value ratio by 1.01 per cent to 3.38 per cent.

The long-term commitments of a five or ten-year deal may still be unattractive to younger buyers. They may have aspirations to climb the property ladder or may not know exactly where they will be in the next ten years.

However, for the more settled homeowners who may have families or living in a home to spend where they intend to spend the rest of their lives, the long-term mortgages are becoming attractive prospects.

Make your money go further with Moneyextra.com. We offer a range of financial help including credit and prepaid cards, debt advice, insurance and mortgages.

Moneyextra.com recommends you take independent financial advice before acting on any article

Back

2012-02-14 12:53:05 © Moneyextra.com