Long-term fixed rate mortgages have a future

Fixed rate mortgages remain the most popular choice of product amongst homeowners, with 42 per cent of people favouring them, and 43 per cent of those expressing an interest in long-term borrowing, according to new research.

However, the take-up on these products is likely to remain low unless the government introduces incentives to make them more attractive to borrowers, claimed the Council of Mortgage Lenders (CML).

People were attracted by the certainty and stability offered by fixed rate mortgages in the face of future interest rate rises, but the CML stated that they would be even more popular if borrowers felt they could exit them easily and at a lower cost.

Bob Pannell, CML head of research, said: "In the absence of a major policy intervention from the government, the take up of long-term fixed rates looks set to remain relatively small for the foreseeable future, and the most we are likely to see is some movement from short-term to medium-term fixed rates."

Rob Thomas, senior policy advisor for the organisation, added: "Measures that would trigger really significant demand for long-term fixed rates are potentially controversial or costly. But mortgage lenders' willingness to innovate in this product area suggests that they will be more than happy to meet such demand if it arrives."

Last week a survey undertaken by Abbey revealed that nearly one in three homeowners would opt for a long-term fixed rate mortgage if they were re-mortgaging now.

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