Mortgage advisors continue to debate over whether long term fixed rate mortgages are best for consumers. Although there is more security in this type of fixed rate mortgage, there is concern that homebuyers that get one now may be paying too much over the long term.
Louise Cuming, head of mortgages at Moneysupermarket.com, says: “My argument against long-term fixed rates has never really been about rates, in the sense that none of us have a crystal ball and know what we might be paying several years from now. It’s more down to the fact that redemption penalties on long-term deals are fixed for long periods of time, sometimes 10 years and even longer. This meant that if you were coming out of a relationship, for instance, and needed to sell the property you were faced with a large cost when repaying the mortgage.”
“That said, Manchester Building Society charges 6.25 per cent for 30 years but you are only tied on for 120 months, so the straightjacket is not as tight as it was. Besides, it is getting to the point where some arrangement fees on mortgages are running to thousands of pounds, which are then added to the loan. So of you pay off the mortgage early, even if there is no penalty you are still paying for the cost of the arrangement fee in the final bill. So I’m less convinced by my original argument than I used to be.”
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