[an error occurred while processing this directive]
BBC News
Launch consoleBBC NEWS CHANNEL
Last Updated: Monday, 10 September 2007, 16:04 GMT 17:04 UK
Lesley's Low-down

Inside Money presenter Lesley Curwen
BBC Radio 4's Inside Money lets listeners explore the financial issues that matter to them.

Each week, presenter Lesley Curwen will offer her low-down on making the programme.

Crunching numbers can be a difficult job, but it is something we do from time to time on Inside Money, to work out whether a financial product is doing its job properly.

But how the devil do you work out whether you would be right to sign up for a 25-year fixed-rate mortgage?

Few of us can predict what our financial or family situation may be across a whole decade

Frankly, you would have to have second sight, a crystal ball - and a fly stuck to the wall of the Bank of England's MPC room, with recording equipment strapped to its torso.

How can anyone even begin to guess what the UK's pattern of interest rates will look like over more than two decades?

The last Inside Money in this summer's series is all about long-term mortgages, following Gordon Brown's call in July for the need to improve the way the mortgage market works.

It has widely been seen as a move to encourage more stability in a UK housing market which has been vulnerable to a cycle of booms and busts.

The new Chancellor Alistair Darling is consulting on how to overcome "barriers" preventing lenders from offering "more affordable" long-term mortgages.

But would our listener Stephen Hunt, who is an insolvency practitioner, be able to pin down exactly what those barriers were?

Michael Coogan, Council of Mortgage Lenders
Michael Coogan was surprised by Chancellor Alistair Darling's stance

The biggest problem, according to the lenders themselves, is that most consumers just do not want to commit themselves for such a long period. It is not really about price; it is not always much more expensive to opt for a 25 year fix, rather than a 2 year fix.

But there can be substantial penalties to pay (often for the first ten years) if you decide to move lenders or pay the mortgage off.

Few of us can predict what our financial or family situation may be across a whole decade.

Of course, the lenders who have recently launched 25-year fixed rate mortgages would argue that you save the fees and costs of re-mortgaging if you stay with one product all that time.

On the other hand, no-one knows what will happen to fees in future years, or whether new, cheaper and better long-term mortgage products will be launched in what everyone agrees is a dynamic and competitive market.

Could it be that the government is becoming nervous about the looming problem of so-called 'rate shock'?
So why is the government so keen to push this agenda at this particular moment?

Michael Coogan from the Council of Mortgage Lenders told our listener Stephen that he was very surprised to see Alistair Darling taking up the cudgels for 25 year fixed-rate mortgages.

Could it be that the government is becoming nervous about the looming problem of so-called "rate shock" and sees this as a possible solution?

Stephen is one of many people who have already suffered from "rate shock".

When his two year fixed rate deal recently came to an end his mortgage payments rose by a fifth.

According to the CML, more than two million people are about to experience a similar jump.

In theory, having a very long term fixed-rate would remove that kind of short-term pain, which may potentially have a severe effect on individuals and on the economy as a whole.

In the end, is our listener convinced that 25-year fixed rates are desirable?

I am not letting on: you will have to listen to the programme.

But do let us know what you think, via our "Have Your Say" forum.

That is the last of my jottings for this series.

Thanks for reading this, and listening to Inside Money, and see you next summer.

BBC Radio 4's Inside Money: A quick fix? was broadcast on Monday 20 August at 1502 BST.


Lesley's Low-downs from other programmes this series




FEATURES, VIEWS, ANALYSIS
Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit

PRODUCTS & SERVICES