Consumers could benefit from five year fixed rate deals
April 22, 2008
A recent report has suggested that whilst many consumers are wary of taking on a very long term mortgage, as suggested by the Chancellor of the Exchequer, Alistair Darling, many could benefit from taking out a slightly longer fixed rate mortgage, as this could end up saving them thousands of pounds. Industry officials have suggested that taking out a fixed rate mortgage over a five year term rather than the more traditional shorter term of two years could save some homeowners a fortune.
Over recent months Alistair Darling has been trying to convince both consumers and lenders that long term fixed rate mortgages for 20 or 25 years will prove effective, and will provide stability to the housing and mortgage markets whilst offering peace of mind to homeowners. However, both consumers and lenders have indicated that this type of mortgage term is too long, and that it could prove expensive for those whose circumstances change in the future to try and get out of the deal should they need to do so.
A five year fixed rate deal, however, could prove beneficial according to some experts, and this is in cases where the consumer is considering staying on a fixed rate for some time through remortgaging. The cost of remortgaging a two year fixed rate deal over a ten year period can prove expensive, as the fees are often around £1500 a time with these shorter term deals. However, with five year deals the fees are a fair bit lower, with many at £1000 or less. This means that remortgaging over ten years on a two year deal could cost around £7500 but with a five year deal could cost around £2000 or less.
This means that consumers that take out a five year fixed rate deal could save around £5000 in fees. However, officials state that the fees associated with these mortgages can vary from one lender to another, so consumers are advised to shop around and compare both fees and interest rates before reaching a decision.
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