Increase in the number of fixed rate mortgages on offer
According to new research from Moneyexpert.com the number of fixed rate mortgages on offer has increased over the last 12 months.
There are also fixed rate mortgage deals avaialble for as long as 30 years, although the average long term fixed deal is around 10 years.
Interest rates on these long term mortgages are increasing because banks are looking to reduce the number of high risk borrowers they lend to.
Sean Gardner of MoneyExpert.com said: “Long term fixed rate mortgages are here to stay. The Chancellor himself announced his support for lengthy fixed deals in the Budget and lenders have already started to react to demand by adding long term products to their portfolios.
“However even though there is now more choice for homeowners, that choice also comes at a higher cost. Average rates on long term deals are up, meaning the consequences of making such a big decision are even more severe. If interest rates start to spiral, you’ll be laughing. But if they continue to drop then you could have saved money sticking to shorter term arrangements.”
Manchester Building Society are offering the longest fixed rate mortgage deal at 30 years but most deals range from 10 to 15 years.
Sean Gardner added: “Homeowners could be forgiven for thinking that the recent reduction in interest rates by the Bank of England would ease the strain on their finances. But with average rates on fixed mortgages, whatever the term, on the increase, it’s no wonder people are struggling to meet their repayment deadlines.
“Mortgage providers are rightly nervous about exposing themselves to customers who may not be able to repay their loans, so it’s understandable that the cost of a mortgage is on the up. People should think carefully before agreeing to high-cost, long-term deals because making the wrong decision for you could be significant.”
So if you are one of the 1.5 million people due to remortgage in 2008 you would be wise to set aside some time to compare mortgages and if you’re not sure then seek professional mortgage advice from a qualified financial adviser. Most mortgages will include some form of fee or upfront charge, like a booking charge or fee, so be sure to ask if there are any upfront fees payable. Apart from that you should also know if there are any penalties with your current mortgage provider if you are switching to a new lender.