Fixed-rate 'future' for mortgages

Fixed rate mortgage deals could be the way forward

Long-term fixed rate mortgages could be a blessing for homeowners as the cost of borrowing continues to rise, says financial information group Moneyfacts.

Home loans fixed for 10 years or more are looking increasingly attractive in the current climate, it claims.

Only a few lenders currently offer the loans, including Abbey, HSBC and the Woolwich, but many more are planning on launching the products.

Fixed-rate deals give borrowers security against base rate increases.

Although the rates are often higher than short-term fixed rate deals they could be worth it in the long run if base rates keeping heading higher, Moneyfacts said.

Scant interest

Surprisingly, however, there has been little interest in long-term fixed rates from borrowers so far.

"But another increase in the Bank of England base rate will have left many homeowners wondering just how many more rises they are going to have to take," said Jane Dawson at Moneyfacts.

"The certainty of a rate fixed for 10 years or even longer is likely to be far more tempting to borrowers now than it has been before."

However, mortgage broker Charcol offered a different perspective, saying that now is not the time to take out a long-term fixed mortgage.

"It looks as if base rates are going to peak at lower-than-expected levels," said Ray Boulger at Charcol.

"If you are going into a long-term fixed rate deal it is clearly important to get the timing right."

It said people who were seeking the cheapest deal would be better off taking out a discount or tracker mortgage.