A recent investigation by Comparethemarket has found that a third of homeowners who are due to remortgage at the end of their fixed deal would want a long term fixed remortgage deal to combat the rising cost of living. The study shows that 32% of existing mortgage owners who are coming to the end of their fixed-term loans are considering to remortgage onto much longer 3, 5, or 10 year fixed deals instead of shorter 2 year fixed or trackers.
The report says ‘There is a clear change in attitudes towards long-term fixes, as just 11% of homeowners will currently only consider a short-term fix when they next remortgage. 45% of borrowers are keeping their options open and will consider both long and short-term deals. 19% of homeowners are also considering remortgaging before the end of their current fixed term, which hints that some are prepared to pay an early repayment charge in order to lock into a new fixed rate deal as rates may still rise further later this year and early next.’
The report goes on to say, ‘There is a general lack of understanding among homeowners around long-term fixed-rate mortgages. Today, there are several long-term fixed-rate mortgages available on the market – ranging from five to 50 years.’
The study by Comparethemarket found that 67% of homeowners believe the longest fixed-term rate on the market is between two and ten years, while only 6% are aware that long-term fixes range between 26 to 40 years. When homeowners were asked what they considered a long-term fixed mortgage, 66% believed this to be between five to 10 years. Long-term fixes potentially increase the amount households can borrow, yet 31% of homeowners have reservations, the poll finds.
Comparethemarket director Alex Hasty released a statement saying:
“The upward trend in the popularity of long-term fixed-rate mortgages looks set to continue, as the cost-of-living crisis grows, and the Bank of England recently raised rates even further. There are many considerations when weighing up what is the right mortgage product for you. Long-term fixed-rate mortgages offer certainty of repayments for a much longer period than short-term fixes and protect against any further interest rate rises. However, this tends to mean the interest you pay on these products is higher.”
“This data released by Comparethemarket is very understandable and not surprising in the slightest to me. People want to be comfortable and safe with their finances. As the country is in economic turmoil at the moment, especially after the last few days of announcements by the government and the Bank of England, it definitely makes sense that people are looking to fix their mortgages for longer.
In fact, I think 5 year fixed deals will end up becoming the norm with a lot of people. At least for the next few years until things quieten down again in the mortgage market. A few months ago we spoke about the prospect of a 50 year fixed mortgage deal coming to the market in the future. A crazy idea? Perhaps not if things keep going the way they are!”
If you or anyone you know is coming to the end of their fixed mortgage deal and wants to discuss remortgaging to a better fixed deal, please feel free to give us a call today to see how we can help.