Long term fixed mortgages for all?

Published:

26 November 2007

Topic:

News,Money,Mortgages

Are fixed rate mortgages really the future? And how long should you secure your rate for?

Following the Northern Rock crisis, there was keen interest in Chancellor of the Exchequer Alistair Darling's first Pre-Budget speech. So when he sang the praises of long-term fixed rate mortgages, there were doubtless many homeowners who took his comments on board.

The Chancellor stated that he wanted to see more fixed rate mortgages - and not just for two years, but for 10 years or longer. He believes they offer more certainty and homeowners should be encouraged to fix their mortgages as a matter of routine.

However, does that mean we should all be rushing out to grab the longest, cheapest fixed rate we can find?

In my opinion, the current mortgage market just isn't as simple as that.

Certainly there's no question that fixed rate mortgages can provide important stability and peace of mind. However, a rate taken over a 10-year period also carries with it an element of risk.

Yes, you know what you're paying out each month for many years in advance, but there is now the chance that if interest rates fall you could be stuck with an uncompetitive deal.

Indeed, most analysts are predicting that the base rate is more likely to fall than rise in the current climate, with some critics suggesting the first drop could come before the end of 2007, so there is even a strong argument that shorter-term rates may provide a cheaper option.

My advice is that you should examine your own finances before making a judgment. If you need expert mortgage advice you can call us directly on 0845 345 5705. Alternatively, you can have a qualified advisor call you by following the instructions in our mortgage section.  

Certainly fixing your mortgage as a matter of routine makes sense. If you're coming off a short or long-term fixed deal you'll need to move quickly to grab another fixed rate product before you're stung with a high rate of interest.

All types of fixed-rate mortgage deals have their merits - but perhaps the key to a fixed rate is that you don't take any risks with your money. By securing a short-term fix you have the peace of mind of locking in a competitive rate for the immediate future, knowing that you can always shop around should rates drop.

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