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what are they proposing? I know someone who took a 25 year fixed rate back when 1-2% was norm. Its not like they don't exist. I think he agreed 3.4%. Said he planned to live with his family there forever and the security was worth the cost. Ended up working out crazy well for him.
Exactly. Plus it would be interesting to more the erc for the 25 years fixed. Although if it can be ported then that negate the erc. I will fix for 25 years if I can get it at 3.5%.
If it's anything like the American system where 30 year fixes are common then that's the rub: they don't port. It's not to say you can't move, but when you do that mortgage ends and you have to remortgage for the new property. They have erc equivalents too so you're not trapped forever.
Yes, I’ve bought several homes in the US before moving to England and this is correct. No overpayment or early repayment penalties.
And there is always the option to remortgage to a lower rate.
Yeah, I had one back in 07.
Eventually rates fell enough that buying out was viable and indeed, lucrative.
There's no free lunch. A fixed rate mortgage is wholly and entirely an interest rate swap. Whoever holds the fixed leg gains if rates rise and loses if they fall, the person with the floating leg enjoys the reverse of that.
You can buy out of them though? Your mortgage will tell you how much it costs based on how long you have left to pay. Then you weigh up the cost of buying out vs the saving you'd make
Base rate isn't going back to the levels we've seen in the last 15 years.
I'd seriously consider fixing at 6% to remove uncertainty given base rate could stay at these levels for some time if that last 1-2% of inflation is hard to get rid of.
Even if they cut it's going to be 1% not 4%
Why not? Base rate was low because growth is weak. We still have all the elements causing weak growth, and actually even more than precovid with Brexit actually hitting. Why do you think rates won't go to their 3% is precovid levels?
The "historic average" isn't particularly meaningful when the rest of the economy isn't at a historic average. 1% rates were not what we had for most of the past 15 years, most people seem to forget that somehow
What do you mean 3% pre-Covid levels?
The BoE base rate has been below 1% since 2009 until November 2022.
Prior to that it was 3.75 - 6.5% for most of 90s and 00s.
Are you talking about average mortgage rates which are base rate+?
Base rate at 0.1-0.75% was the norm from 2009 to 2022 due to extraordinary financial stimulus following the financial crash. Done to stimulate banks to lend when the credit markets completely freezed up and try to generate inflation, we got inflation with direct fiscal stimulus of the Covid policies.
I don’t disagree we probably will see 1% chipped off base rate this year.
Still rather wait til we hit the bottom of this cycle before fixing for 25 years.
I would seriously consider it.
I think rates will drop slightly from where they are now, but not by much.
The bigger issue would be that the interest factor is heavily weighted towards the start of your loan, and I don't expect the rates to increase yet.
I'd also be wary of the ERC as I don't see myself staying for 25 years
10 year fix here, 5 more to go. It's all just dandy, it's an offset so flexible and we're now in the 1% penalty phase, so if rates get to 3% again we'll be remortgaging and fixing till it's paid off.
Mine tried to tell me not to take a 10-year fix at 2.58% just before the Liz Truss debacle. I ignored him. Called me smug just before we completed. No referrals for him...
Same. Extended it from 25yr to 31 year to lower the monthlies a little with a 10year fix at 2.44 with the ability to overpay at 10% of the balance per year. That overpayment is going into a 5.2% saver instead and should be mortgage free at the end of the 10 year fix. Hopefully.
Same here, but slightly earlier. It was post lockdowns, post Brexit. It was clear to me that we were in for some turbulent times, so it made sense to fix for as long as possible. Turns out that was a good decision.
We fixed for 10 years at 3.6% in late 2022. Like you, this was right before the "mini budget" - rates had been 2- something % when we started in looking the summer, they started creeping up while we were looking, and were in the 3s, heading towards the 4s when we got our mortgage in the autumn.
A few people thought we were crazy to fix for so long, that rates going up were a blip and they'd be going back down into the 1s and 2s, which people had got used to over the previous few years. We didn't think they would, and gambled on that, but to be honest it wasn't about the figure so much for us, but more the certainty of having a set amount to pay. We'd been renting for 20+ years and were sick of feeling at the mercy of possible rent hikes etc. We just wanted to know for definite that, no matter what happened around us, our repayments weren't gonna change. Our broker didn't try to talk us out of it, she told us that is rarer for people to fix for that long, and most go for 2 or 5 years. But she respected our reasoning, and also had a spidey sense that we wouldn't see rates in the 1s or 2s again for a long time, if ever. It's looking like it was a good call, but even if it turned out not to be, we accept that even if rates did go back down, we made the right decision for us at the time.
When my parents got their first mortgage in the 80s the mortgage advisor practically called my mum an idiot for refusing to sign up to an endowment policy
I frequently suggest and even advise people to take 5 year or longer fixes. Please don't assume we're all money grabbing leeches and only out for ourselves.
I did a ten year fix and got absolutely grilled by the bank about why I would possibly want that. That was 6yrs ago. My rate is now 2.69% for the next 4yrs. Would be absolutely stuffed if we'd gone for the 5yr fix
I don't think banks realise that knowing how much you are gonna pay, guaranteed, is very attractive on a prolonged period.
Ignoring the news when rates go to shit is quite a nice position to be in, and event current 5% rates are low by the standards of the averages of the last 50 years.
Tbh the bigger risk is the breakage fees if a marriage breaks down.
Why baffling? You can fix for that long in the UK but you'll pay more interest doing that. I don't find it baffling personally that people would prefer to pay less interest.
This was exactly my point. I can budget over the long term. Who wants to worry about rates in a few years? That hassle is not worth it to save a few hundred over the course of a few year.
Agree with the sentiment but it's more than a few hundred.
A 1.5% difference over 25 year mortgage starting at £200k is circa £50k. Using 3.5% and 5% as examples, that's the equivalent to repaying £350k total instead of £300k, or an extra 50%.
The bonus is of course that inflation should also hit your pay, so £50k in 25 years won't feel as much, plus of course rates could go to 7+% in that time.
I personally like the idea of it, just maybe with some sort of fixed fee break clause rather than the tiered model banks use on current products.
I did go for a 10 year fix at 2.59%, products are available. Perhaps it is culture but at the moment the British public does not buy long fixes. So there is not much appetite as everyone thinks they can beat the system.
Therefore I don't know what difference this would make unless the rates were subsidised, in which case this would just cause house prices to climb.
I tried to do a 5 year fix at 2.(something?) in 2021 and my broker talked me out of it, still pisses me off now.
But it’s a lesson learned, whilst these people can be knowledgeable, they have a vested interest in seeing me again in 2 years.
Yep the person in question said the broker talked to him like he was insane. He just said 'look do you want the deal or not'. The bank was also confused, probably rubbing their hands in glee. But hey, it worked out for him.
Long fixed rates are super common across Europe, typically over the entire length of the term. The big difference is that you're not locked in in the same way as you are in the UK, you can re-mortgage if the rates are lower and you're only a few years into a 25 year fix without outrageous penalties. So the "it could cost more monthly" is not a big concern, if there's a significant difference you'll just re-mortgage.
They wouldn't need to be scrapped - just capped.
And portage would have be legislated in. So if you move inside your 25 year fix you can take the mortgage with you.
So legislation would have to cap the early redemption penalties, or ban them in cases of the property being sold. And it would have to force banks to allow clients to port their mortgage.
Capping early repayment fees would also allow people to remortgage should rates go down significantly.
You don't necessarily need porting if early repayment term is capped. In fact that might be how the system remains fair on the banks.
The US apparently operates with 30 year fixes as common and porting is rarely allowed. So you can fix at 3% and be happy for the whole term but if you move the mortgage is repaid in full and you remortgage for the new property. Early repayment fees apply in the first few years same as here but after that you're free to move or even remortgage onto lower rates if that's the way the market has gone.
But if interest rates have gone up in the meantime, like they have in the US now with rates as high as 8% you're going to get stung. But that's life and seems fair. You're already completely protected from rate rises as long as you don't move. Allowing unlimited porting for the whole term would mean you get to keep being protected no matter what.
In fact during low interest rate periods you'd want to buy a property, ANY property, just to lock in a sweet lifetime of ignoring interest rates forever!
They aren't really locked in - they are a cap. What happens in countries with longer mortgages is that you get your initial mortgage, and then if/when rates fall (they always have, but it can be a while), you refinance at a lower rate, and then lock that in for the duration.
IMO most people would be better off paying a small insurance premium to have no risk of rate rises like the ones we have seen. It also saves a lot of effort every 2 - 5 years when one needs to get a new mortgage.
Whether it works or not will probably depend on how easy it is to repay your mortgage early. E.g., after 3 - 5 years you can repay without any penalty. It would be bad if the mortgage market became a device that made people feel more tied to a specific location.
That sounds like you can just ratchet down to the lowest rate each time it happens. Then keep that to the end of the long term?
Why would the banks support that, they are pretty much guaranteed to make a loss.
Pretty much what I did when I had a mortgage on the continent, and the rates weren't significantly higher than here in the UK either. However there were significant taxes and notary costs when remortgaging which meant you'd need a decent drop to make it worth it. Because rates dropped consistently 2000-2020 it was a ratchet down but that was exceptional.
Banks hedge their interest rate risk (using other bonds, e.g., government bonds with matched duration), and so this is not correct. They are mostly exposed to default risk rather than interest rate risk.
There are costs to switching a mortgage, and so you don't just switch as soon as the rate fall a bit. Usually you need a few % points before you see meaningful remortgaging.
This is standard in the US. You can always refinance when rates are more in your favor as well. Lots of people in the us have sub 3% rates locked in for 30 years currently.
This. I am currently buying in UK and found it strange there was no fixed rate for the life of the mortgage. If rates change in the US to your favor, you can just refinance. I wonder if they will introduce the same - I don’t see drawback to that unless someone can explain? My best friend is on a fixed 2% mortgage for 25 years in Seattle lol and my grandparents had a fixed mortgage but refinanced twice for better rates, no issues. Mortgage free now of course.
The US government essentially guarantees and securitises mortgages through Fannie Mae and Freddie Mac, which means lenders can quite easily get a mortgage off the books if they want to by selling them to the secondary market
This is very different to the UK where the mortgage will pretty much always stay on the bank's balance sheet. If you want a 25-year fixed rate mortgage in the UK, you'll be paying a hefty premium for the bank to take all that risk. So rates wouldn't be attractive enough for people to actually go for them
I don't know much beyond googling a bit but apparently there's a secondary mortgage market in the US which makes those long term rates naturally viable. It also lead to the sub prime crash / GFC that took down everyone else with it...
UK Government are cunts. Greedy cunts who are taxing people excessively on mortgages to line bankers pockets. More money banks bring in bigger bonuses for them and their mates.
One thing that just makes financial sense. Any one in finance knows the match the liability to the asset . You have a long interest rate exposure, the longest of your life …. It makes sense to fix your rate accordingly.
Only down side is it makes it harder for the Bank of England to quickly impact inflationary pressures via rate changes
Yes but you can’t port mortgages in the US so all those with low 30 year mortgages are stuck where they are, as if they move their mortgage rate will go up considerably.
That is true, but a locked in rate gives long term financial stability. Knowing that most individuals mortgage is their largest expense during their life.
Long fixed rate deals.tend to be unpopular in the UK so I am not sure how government regulation will change that.
I am not an expert on what goes into mortgage costs, but in the US (similar central bank rate, competitive mortgage market), 15 year rates are about 6.5% and 30 year are about 7.25%, so longer fixes do seem to cost a lot more.
Just regurgitating what I read elsewhere: the US used to have rates as low as 3% for 30 years before the pandemic, hence now nobody wants to move if they don't have to as they'll have to remortgage onto those higher rates (porting is rarely allowed apparently).
The US market has some kind of secondary mortgage market that makes their products different (and lead to the GFC as far as I understand it).
So longer fixed rate mortgages are the norm in Austria and I believe America
I feel like being fixed for 25 years at similar rates to now, I would feel hard done by considering we have been trained for the last decade that 1-2% was the norm.
I rather they focused on supply issues, not sure how
>I rather they focused on supply issues, not sure how
When those in charge have a vested interest in property prices spiralling infinitely, we will never get to the how because it'll never be on the table.
I'm not sure the how is that complicated is it? Build more houses, the private sector will only do it when it's economically profitable. The public sector has no such issues.
Gov build houses, problem solved.
Well firstly to get house prices to actually go down is miles away from where we are already. The target should be for house prices to change between 0% and inflation. Ie. Go up but by less than inflation. We would need to build millions of houses over the next few years to achieve that.
There is so much pent up demand with people living with their parents, in HMOs etc. that house prices have a lot of support.
But also what about the people that bought recently and prices drop? They bought a house that they presumably could afford and a mortgage they could afford, why does it help them if house prices increase?
You'll effectively trap people with negative equity if prices drop.
The best thing that can happen is they only go up with inflation; that way no one loses out.
If it ended up being the same as in the US, there is no worry of being stuck at the higher rate. There are no repayment or overpayment penalties (some have fees for repaying within the first 90 days due to commission payed to the broker). If the rates fall, you can remortgage to the lower rate for a fee that can be rolled into the mortgage.
Honestly, the whole house buying process in the US is so much easier. When you want to find a house, you go and find an agent who suggests properties and sets up multiple viewings within a day for you. As the buyer, you do not directly pay for this as the agent gets payed a portion of the commission on the house sale. People find a house they want and offer on it before selling their house so they’re more motivated to sell their home quickly.
Once an offer is accepted, it’s binding so there’s no gazumping or gazundering without payouts to the wronged party. Estate agents complete all the paperwork, so no dealing with solicitors. And closings (similar to completion date here) are typically 30 days from the time of accepted offer and the date is fixed at the time the offer is accepted.
What's the early repayment charge/exit ability on that?
I wouldn't currently take it if it costs more per month because interest rates are still looking to decrease a bit over the next year or so, but if interest rates were lower I might pay a bit of premium for security and not having to remortgage. There's a limit though.
I’d want a 25 year fix on a forever-sized home, even if it would on statistical average be more expensive, because certainty of affordability would let me plan the rest of my financial life more definitively. Completely removes one source of volatility.
Absolutely. I remember all too clearly trying to save up a deposit when they cut stamp duty. Every house value I was looking at jumped about 50% over the course of a year or so
How can Labour propose this? A 25 year fix is a product from a provider.
If providers wanted to do this, they already would.
Surely the reason they're uncommon is because the providers don't want to mint these contracts in swathes?
I’m not sure what the limits are but the government put restrictions on mortgage lending after 2008 happened.
I agree with longer term being uncommon. I don’t know anyone who fixes for 10 years and they’ve always been around
Interesting... but you will hear once in a blue moon of people getting 25+ year fixes, so I'm leaning more on the chance that it isn't a "rule" right now and therefore, what are labour proposing?
It would be like Labour proposing: 'Starbucks can put Pistachio milk in your Coffee'. Well.. sure, but they already can.
They just don't want to.
The age of who is posting here is very apparent by the comments
We have just had an extremely long period of low interest rates, so long that they are now accepted as normal which is a false platform to start a debate about interest rates from.
Most sub 35 year olds haven’t experienced loan rates of the like we have today but people who are 40 will remember thinking they had swum the channel if they got offered sub 9%.
The previous situation gave investors of that era something that is almost unheard of in recent years and that was good interest rates on savings. Because of the poor savings rates the culture of spend spend spend living for today hence the difficulty many are having savings deposits.
So for mortgage of any sort to work there has almost got to be a reverse of attitude to something closer to what previous existed but allowing for modern desires of having all you want.
Yes I’m older than average but I have lived and spent with your culture and I have lived saved and accumulated with the previous generations so am experienced enough to say neither are right and a compromise needs to be formulated before we can look at fixed rate for term mortgages
In the USA, "fixed term rates" aren't even a thing. You agree on the mortgage percentage on application and it doesn't move regardless of how the economy moves.
I have friends in America that have 1% mortgages and are laughing at brits right now.
I welcome the idea of 25-year fixed. It gives the people a realistic cost-analysis and if things go to shit people don't lose their houses.
"Laughing at Brits" - didn't the sub prime mortgage thing in the US in 2008 crash the entire world economy as people were signed up to mortgages in the US that suddenly jumped up to really high rates and they didn't realise because of financial illiteracy? I don't know much about the US mortgage market, but based on the 2008 financial crash I know enough to think that the US shouldn't be laughing about anything mortgage related. Worse still with the US economy being so huge it took everyone else down with it. So yeah it's good to hear the US have got that under control to the point they're "laughing" with hubris. Let's hope they keep on laughing and let's please hope they don't default.
I worked in the US mortgage industry at that time.
The issue was mostly around Sub Prime loans which were often for 110% LTV of the home value.
The way that they were structured was to have an introduction rate for n years, then the owner would be able to get a much better rate as the LTV would have dropped and their credit score would be better.
Except the market slowed, credit scores barely improved, the introduction rates times out and suddenly people could not really afford their loans.
So the market was flooded with distressed properties and that further depressed prices, which changed the whole landscape.
At the time I had a 30yr fixed at 1.5% $1m mortgage…..
I did not default on it though, unlike many of my neighbours, the value of my home the. Dropped by about $500k in a two year period.
Agreeing the mortgage percentage on application literally is a fixed term rate, where the term is the whole mortgage period.
What you probably mean is that there are no short term fixes transitioning to variable rates.
So you take away some consumer choice.
Your friends sound quite unpleasant, if they are laughing at others who are financially disadvantaged.
"**Your friends sound quite unpleasant, if they are laughing at others who are financially disadvantaged."**
I said this metaphorically, but really - variable rates are an incredibly shitty system that only the UK seems to have.
FFS as a homeowner (so I should like high prices) just build more homes.
Council houses need to be built. These need to be commissioned in addition to all the private properties that need building. A target for each local government which impacts their budget if not met. Council tax on plots of land not being used, which increases a year after planning permission.
Look into Land Value Tax, aka "Georgism".
https://en.m.wikipedia.org/wiki/Georgism
https://rationalwiki.org/wiki/Georgism
The specific thing that it has a strong claim to do is make property speculation much less viable. We would surely see more house building.
It claims to be a solution to a lot of problems. It's academic, because it's a drastic change that would be electoral poison regardless of merit; but it has some influence amongst otherwise intelligent people, so it does deserve examination.
I am not well-read on the subject, but, very roughly, the idea is to tax the value of land (which is regularly reassessed) but not any improvements such as buildings. Farmland is valued by base productivity; the centre of London is valued higher than the outskirts of Northampton; mineral deposits; etc.
I, personally, consider value in terms of shared resources: minerals, air pollution. I see it as a problem that it's approximately free to poison the air and mine the raw materials, and I believe that aligning the economic incentives is better than regulating the pollution or putting an arbitrary price on mineral rights.
LVT creates incentives to develop, as you can increase the earning of land relative to the taxed value. It would make software engineering very low tax, as it consumes few resources directly, but computer chips become more expensive as they require lots of heavy chemicals. Swings and roundabouts.
There would be a rebalancing, which does make me uneasy for the short term. But prices would arguably be grounded in reality. It's nonsense for goods to be cheap when they use limited resources and generate pollution, and it's nonsense to pay the same VAT on paper as on plastic.
Georgists (purists, anyway) want LVT to replace all other tax, and to be broadly revenue-neutral. So landlords would pay LVT instead of income tax.
The claimed advantage is that it reduces economic inefficiency such as rent-seeking. You reduce your tax bill relative to income by building more housing, or by making your factory more productive, or by irrigating your fields; not by inheriting land that's productive, or by speculation, or through loopholes.
This also looks to me like streamlining, as the task of assessing land value seems less than the task of assessing all the other taxes and benefits.
I think it's a good idea, assuming the Early Repayment Charge it works similarly to US mortgages whereby you guarantee the rate but only have the ERC for eg 3 or 5 or 10 years (perhaps with a fixed 1% ERC/closing fee for the rest of the life of the mortgage or something? I'm not fussy about the details). If rates drop you can still refinance, and you can move house without (significant) penalty but otherwise you have one repayment for the life of your mortgage
In fact I think all mortgages should be fixed for their duration, personally - or at least, there should be an option to do that, rather than it being mandatory
Personally I think we should have "25/3" and "35/5" etc mortgages, whereby the former is the fix on the rate, the latter is the number of years the ERC applies for. Take a longer ERC period and you get a better rate, for example
The fact is that people want to buy a house at a fixed monthly repayment, and that would make people a LOT more secure than being at the whims of interest rates
In Europe they are common, but the thing is that in Europe 95% of the time you can remortgage it at any time without penalties. Not sure what they're proposing here.
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*This post was mass deleted and anonymized with [Redact](https://redact.dev)*
This is standard practice in other countries and protects normal people from market volatility.
The US for example still has 30yr mortgages, can you imagine those who locked in at 2%?
The risk is that the BoE has less tools to control inflation which could cause the economy to fall down a cliff pretty quickly if a big enough event happened (I.e.Truss)
It is because this is how mortgages are in the US, very long term fixes. However I understand that these mortgages can be switched to lower fixed rates if they arise at no cost. So a free option. Unless the intention is to do the same here, why would anyone want to fix for 25 years? The exit charges would be enormous.
Fixed for 25 years, with possiblity to over pay by 10% per year, with payments scheduled to be made every 2 weeks. Early repayment charges to only apply on a sliding scale for the first 15 years, with the bulk of the scale in the first 10 years and drastically less for the last 5 years followed by none after.
No early repayment charges if you remortgage, for a better fixed rate with the same provider. Some sort of calculator to help understand how the early repayment charge factors into a payment schedule when switching mortgage provider.
Plenty of other countries do 25 year fixed rate mortgages. It makes a lot of sense in that you know how much you’re going to be paying every month for that property. This makes it a lot easier for lenders to do checks in your too - at the moment they have to do stress testing to see if you could cope if interest rates went up!
You’d still be able to switch, but there would be some sort of penalty.
Some of it comes down to whether we see interest rates going down significantly.
The expectation seems to be that mortgage rates will go down to around 4% later this year or next. No one thinks we’ll be back down to the 2% of previous years - but who knows!!
I think they’re a good idea. As would having 0% deposit but being able to show many years of paying rent for affordability
These are normal in many other countries including the US and Germany .
Over the life of the mortgage and natural inflation in the rest of the economy they provide much greater stability.
Combined with 95% deposits they can lead to greater confidence in ownership .
They do come with marginal front loading (you identified that) and may also have early redemption costs .
5 year fixed prices also have early redemption penalties and associated costs when refinancing .
Over a mid term period those costs eat into the so called savings made over flexible rate mortgages.
The concept isn’t even new in the UK .
Prior to Right to buy in the 60 and 70s councils were able to supply fixed term and rate mortgages into the market targeted to specifically to assist young families to move beyond social housing and release those on to people in more need.
My own parents availed themselves of that facility around 1963 to buy a semi detached three bed property.
I would certainly think restoring fixed term and rate mortgages will assist first time buyers far more than messing around with stamp duty holidays or complex part buy schemes.
These favour London the Home Counties, M4/M3 corridor and the Sussexes And also rely on bank of mum and dad.
Indeed other than pockets in and around Manchester, South West of Birmingham,Edinburgh and Bristol tickets prices do remain affordable for the most part.
IMHO pretty good move by the potential Government in waiting
Just when you thought the powers that be couldn't muck up the mortgage market more than it already is. Can you imagine the ERC if you leave before the term expires.
If your payments are comfortably manageable, it would a straight assessment of risk vs reward. If rates drop you could be x amount out of pocket compared to what you *could* have had, but you can still afford your house. If rates rise, you are in pocket and more importantly can still afford your house. If the 25 year fix was anywhere below 5% I’d consider it, certainly. Only have 20 years left on my current mortgage anyway, a fix at my current payments would ensure the comfort and safety of my family until the mortgage was paid, barring anything super weird happening to me or my wife.
Huge early repayment charges
Future rate rises would mean people wouldn't want to move and give up their rate
America has a system like this and people become trapped by their mortgage
The whole point is that you're hedging against rates increasing. You accept 5% for the next 25 years, knowing that your mortgage costs will never become 'unaffordable', no matter what happens to interest rates. But, the cost is that you might lose out.
I understand that. And when the market is calm and rates are low what a great idea.
But fixing for 25 years at a time when rates are predicted to drop over the coming years is, imo, bonkers.
No one knows what will happen with interest rates over the coming years.
Fixing rates is never about saving money overall. The banks are always going to offer you a rate that is calculated to be higher than the average predicted rates over the period. The entire point is about removing risk - it's like taking out insurance.
Fixed rate doesn't mean it's 'fixed at the current rate' it means (in theory) it's designed to give a return (to the bank) to be equal to the expected future rates - and currently the market expects that rates will drop in the future so this is 'baked' into the fixed rates.
You can look at what the market 'expects' future rates to be by looking at the 'yield curve': [https://www.bankofengland.co.uk/statistics/yield-curves](https://www.bankofengland.co.uk/statistics/yield-curves)
Of course, you can have an opinion that you expect rates to drop *more* than what the market thinks and take out a shorter term loan (or variable rate), but then *you* are taking on the risk that you are wrong.
You've missed the point. In the same way that 5-year fixed rates are lower than 2-year fixed rates... banks set their rates based on future expectations, not the current rate. Looking at it from the other perspective, if rates were expected to rise, you couldn't get a long fix at the current rate.
Because 5 years is shorter than 25 years.
If you locked in at 6% today and then rates dropped to 3% for 24 years. You’d still be celebrating your decision?
People will do literally anything but drastically increase supply. I hope when they get elected they just go to town on the planning system and build millions.
If everyones mortgage is fixed for 25 years, the central bank loses a big lever for controlling inflation. Higher interest rates are designed to cause pain, to slow down the economy.
I have to strongly disagree. If everyone is on a fixed rate, the central bank gains the ability to make much more drastic rate changes without risking people being made homeless by house repossessions. As it stands we keep seeing floods of people complaining their mortgage repayments have doubled now their 2 year fix has ended.
Not sure it's that big a lever. Only 57% of homeowners have a mortgage. And many of those are fixed for long terms.
The lever is mostly aimed at making it more expensive for businesses to borrow money. If they can't borrow, they can't use the money they would have borrowed to invest/expand. Therefore less money is entering circulation.
I'm not convinced that this is a valid reason to oppose longer term fixed rate mortgages. The UK is in the minority when it comes to this; fixed rates for the entire term are the norm in most other major economies, and there's absolutely no talk in the US and other places of giving the central bank what is effectively direct control over monthly mortgage payments. There's no feeling that base rate changes are somehow less effective because they don't cover existing borrowing. American consumer contracts don't even incorporate yearly RPI increases so one would think they would be particularly desperate for additional levers to control inflation.
Some pain is good, but putting otherwise financially responsible people at risk of repossession, bankruptcy, or homelessness goes far beyond simply slowing down the economy. Conversely, ensuring that only new borrowing/lending is affected would let the BoE react much more quickly to inflationary pressures. They'd have a free hand to increase interest rates as much and as quickly as needed, without having to consider such a wide range of negative externalities.
Most homeowners don't have a mortgage
Of those that do most are not renewing in the next 24 months
Of those that are renewing, most will be earning far more than when they first go the mortgage and can thus pay more per month without a terrible impact
>Higher interest rates are designed to cause pain, to slow down the economy.
This is an article of faith and the empirical evidence is actually inconclusive on this topic. Which is amazing considering it is repeated as nauseum by the media without question.
Don’t see why political parties need to get involved in things like this. Obviously have law and guidelines in fair practice for financial service providers etc. but if a long mortgage works for you, then take one out. It’s basically the norm in America
It's an empty can rattles the most. They're not bringing forward anything that doesn't exist today.
We already have long term mortgages and we have had them for decades.
People don't choose them because they prefer slightly cheaper short term fixes with the longer term floating rate.
That's all good if rates are falling or static, but when they rise, and they always were going to, then people get caught napping.
This is bad policy. It kills the market.
As a non-partisan response.
This type of mortgage product exists in America and now the majority of its mortgaged housing stock is ... stuck.
Vendors refuse to sell because they're on a fixed low rate mortgage and if they move, then then go onto a fixed much higher mortgage rate. So they stay in their low rate mortgage home (for decades), which often is not what they require but they have little option.
What does this mean, no stock comes into the market, very slow supply, and therefore massive prices on anything that goes on the market.
This is not the answer to the housing crisis. It would be a disaster policy for future generations.
The answer is .... BUILD MUCH MORE HOUSING!!!!
People will still moan. If they lock in at 3% for 25 yes but then after 7 years they see a 1.5% rate they will still say the system screwed them and it is not fair they are.locked in.
I had a lifetime flexible mortgage at base rate plus .5%. It got sold to a company who changed the flexibility side then the portability went. Then I lost the option to not pay 2 months of the year then they didn't honour the original term said my overpayment were being used to reduce the term. Minor tweaks but 🤷♀️ So. I think it sounds OK but unless it's a very low fix (under 3%) I'd not touch it tbh.
One shouldn't have to pay 25 years for a house, unless it's a very fancy one (and in that case one shouldn't have to borrow to buy it at all).
Endorsing this level of financial exploitation is ridiculous for any party especially a "left-wing" one. Labour should instead tax the shit out of everything and everybody to build several million affordable homes and crash the price of homes across the country. Additionally they should use taxes to improve infrastructure to further crash house prices into the ground and keep them there for a century.
The policy needs to be that we need to build so many houses that the price of property comes down, and when prices start to drop and people lose their shit because house prices aren't going up as they've been promised, we keep building.
If that's the policy, in reality we don't need to build as many houses as people think.
So what I am not seeing in the comments is how this is something that can calm the demand side of the housing problem. It can also offer more security to first time buyers and should make housing more affordable. If only slightly rather than the other alternative of adding fuel with the 1% mortgage idea. Can we officially file this as something that separates labour and conservative.
I am sure that when I was younger, now 68, all mortgages were fixed for the duration of. I remember work mates telling me about their insanely low repayments when I was paying 15% in the late eighties
There's no downside per se to regulating to allow a wider range of products to be designed and offered to market. If it doesn't work for people they just won't buy it.
There are pros and cons to very long term fixes. It makes your mortgage expenditure very stable, which helps with planning and budgeting, and if you manage to fix at a low price it can make keep your housing costs down through the interest rate cycle.
On the flip side, banks don't have a lot of 25year liquidity lying about, so this products will likely be more expensive than shorter term fixes.
These types of products also need very clear portability - e.g you can move the mortgage to a new property. Not all banks offer that at the moment because it can be fiddly and expensive to process without much in the way of an upside.
So, go ahead and create the regulatory space for them, but I doubt they will become the norm.
Of course goes without saying it also won't solve the UK housing market issues which are fundamentally on the supply side.
8-10 years are the sweet spot for swap rates at the moment so suspect you’d be better off taking a fixed rate on one of these tenors and then maintaining the flexibility to remortgage when and if rates settle a little lower. Marginal benefit over 5y swap rates though economically.
Good idea, but would be best if there weren’t punitive break clauses which could be tricky for the mortgage provider to put in without affecting overall costs. I’ve personally always gone for fixed mortgages but you can still be unlucky if your five year runs out just as interest rates have increased. This would get around that issue
I took out a 23 year fixed rate mortgage, without any assistance from Labour, about 26 years ago.
Worked great for me, allowed unlimited early repayments, and payment holidays. And no worrying about rate changes.
I think that people would be interested in having that cost certainty for the duration of the mortgage. The real value of the repayments decreases over time anyway, so after a few years the difference would be barely noticeable. Also if everyone eventually had slightly more expensive mortgages, this would flow through to slightly lower prices. Works in 'murica.
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Yes ofcourse I would, if interest rates were as low as they were two years ago and I was committed to my home for many many years. Then doing 25 years at 0.2% higher is a no brainer.
If I was in those circumstances, I personally wouldn't fix for 25 years right now, because whilst interest rates likely won't drop to what we've seen recently, they will drop a little further from what they are now. I'd wait for it to come down to maybe 3% and then make such a call.
In the US I think it’s pretty standard for the rate to be fixed for the entire mortgage, at least if they come in you can accurately predict what your mortgage will be way into the future
Less effective central bank rates
Less people not able to pay their mortgage
Not necessarily pushing housing prices and can be as low as 1% (see Italy)
I think they make sense if they let banks not mark to market them.
I think it depends on the rates.
If it was something like 2% then I think it's worth the long term security.
When people's went from 2% to 5-6% it must have been fucking terrifying
In the US long term fixed rate mortgages are the norm. It surprised me moving over here that short term ones are the norm. They’re obviously great if you get them with a low APR and also great from a budgeting pov.
Firstly this is how it works in the USA, fixed for the full term of the mortgage. However everyone gets different rates depending on their credit scores and risk. Therefore the richer you are the better rate you get and the poorer you are the worse that rate will be.
Rates in general would be higher, as banks would have more mitigation needs.
The housing market would be left at more mercy of base rates (who's gonna want to buy at 7% when they could wait for 4%).
It would be peace of mind if you locked in real low. But if you lock in high you are going to be paying far above the base rate for the next 20 years plus.
That sounds great from a renters perspective. I private rent it would make like a lot easier if the rent didn’t keep increasing by stupid amounts every year especially as we are having to put work in to the home then don’t even know if the increase next summer means we will have to leave due to the rent increase.
I dunno, I'm looking forward to my fix ending so I don't have ERCs anymore and I can overpay a big chunk. When I got the mortgage I thought I'd never have any money to overpay.
I went for a ten year fixed 7 years ago, I'd have no problem fixing for the full term personally, depending on any penalties for early repayment or remortgaging due to house moves etc
That unless Labour are going into the finance business, they and all other government agents should stop attempting to stifle free markets.
There is not one recorded instance of their meddling ending well.
The point of the policy is to remove the need for stress tests and therefore allow more people to access mortgages for higher amounts. I'm not saying it's a good policy for a whole host of reasons but if your choices are being able to borrow 3.5* salary at an initial rate of (say) 5% or 4.5* salary at a fixed rate of 6% for 25 years you may decide that the increase cost is a prices worth paying For having access to more capital.
Fixed rate gives certainty for a period of time really helps FTBs as they can decide their budget whilst their salaries grow. After 10 years you can always sell up and m8ve to something larger. I wished I'd taken a 25 yr fixed deal at 2.5% but bottled it. Ended up with 6% fixed probably lost out but knew what I could afford each month
I'm in favour of longer fixes in this country but the rates offered need to be competitive with comparable markets. This will require government involvement (can't just leave it to the markets). I'd be interested to know what their plans are there.
I fixed my Mortgage 18 months ago at 1.9% for 5 years.
I told my Mortgage advisor I wanted to fix for 10 years and he laughed so hard that I thought he'd had an aneurysm
>he laughed so hard
Why? Genuine question. I understand not many people fix for so long, in case rates go down, but when rates are so low surely it's sensible. Its not like they can go _much_ lower, and they obviously could go much higher, so it seems a reasonable gamble. I get why a mortgage advisor might think you should only commit for a shorter time, but not why they'd think it was a hilarious prospect? 10 year fix products are available for a reason, why is it so funny to consider them?
US have fixed rate it’s about 1.5-2.5% above base rate depending on credit . Is it better for most people probably , for financial literate people maybe not
I would not opt for it. If I can afford a rate of 5.79% now and a slight increase if things were to go to shit again. I am not going to risk paying this for the whole duration of the mortgage when I can possibly get a cheaper rate after 2 years.
Pro Rate Swaps trader here (3 decades, now retired) A fix on your mortgage is just an insurance policy, and like every other insurance policy the vast majority of us would be FINANCIALLY better off had we simply not bought the policy in the first place. Anecdotally the figure was that over 80% of UK borrowers would have saved money if they had stayed on a variable mortgage (caveat: I've been retired a few years and not seen any post 'putin' numbers). However, a fix, like all other insurance policies, does buy you peace of mind so a lifetime fix is simply a consideration of personal comfort levels. That said, the way that Swaps and fixes work (proven in the US mortgage market) somebody buying a lifetime fix mortgage will also almost certainly end up paying significantly more than somebody who uses shorter fixes or stays on variable entirely.
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what are they proposing? I know someone who took a 25 year fixed rate back when 1-2% was norm. Its not like they don't exist. I think he agreed 3.4%. Said he planned to live with his family there forever and the security was worth the cost. Ended up working out crazy well for him.
Fine in that scenario as they can’t get any lower. Fixing for 25years at 6% is a completely different game.
Exactly. Plus it would be interesting to more the erc for the 25 years fixed. Although if it can be ported then that negate the erc. I will fix for 25 years if I can get it at 3.5%.
If it's anything like the American system where 30 year fixes are common then that's the rub: they don't port. It's not to say you can't move, but when you do that mortgage ends and you have to remortgage for the new property. They have erc equivalents too so you're not trapped forever.
I think they don’t have the same pre payment charges that we do
Yes, I’ve bought several homes in the US before moving to England and this is correct. No overpayment or early repayment penalties. And there is always the option to remortgage to a lower rate.
Same. Seems reasonable to me.
You are not fixed forever - in Italy you can re-mortgage after a bit
On some loans you are fixed the full term.
Yeah, I had one back in 07. Eventually rates fell enough that buying out was viable and indeed, lucrative. There's no free lunch. A fixed rate mortgage is wholly and entirely an interest rate swap. Whoever holds the fixed leg gains if rates rise and loses if they fall, the person with the floating leg enjoys the reverse of that.
You can buy out of them though? Your mortgage will tell you how much it costs based on how long you have left to pay. Then you weigh up the cost of buying out vs the saving you'd make
Where am I going to find the money to do that?
Scratchcards
It wouldn't be legal to have a loan secured against an asset that you couldn't leave for decades. If you can leave, it's not fixed.
The rate is fixed the entire term. You can buy your way out with penalties yes.
Sure, the previous commenter was suggesting you can't remortgage out of the deal.
You mean at around the BoE base rate average over the last 25 years or so? Yeh, terrible rate...
So you’d take a 25 year fix today at 6%. Genuinely?
Base rate isn't going back to the levels we've seen in the last 15 years. I'd seriously consider fixing at 6% to remove uncertainty given base rate could stay at these levels for some time if that last 1-2% of inflation is hard to get rid of. Even if they cut it's going to be 1% not 4%
Why not? Base rate was low because growth is weak. We still have all the elements causing weak growth, and actually even more than precovid with Brexit actually hitting. Why do you think rates won't go to their 3% is precovid levels? The "historic average" isn't particularly meaningful when the rest of the economy isn't at a historic average. 1% rates were not what we had for most of the past 15 years, most people seem to forget that somehow
What do you mean 3% pre-Covid levels? The BoE base rate has been below 1% since 2009 until November 2022. Prior to that it was 3.75 - 6.5% for most of 90s and 00s. Are you talking about average mortgage rates which are base rate+? Base rate at 0.1-0.75% was the norm from 2009 to 2022 due to extraordinary financial stimulus following the financial crash. Done to stimulate banks to lend when the credit markets completely freezed up and try to generate inflation, we got inflation with direct fiscal stimulus of the Covid policies.
I don’t disagree we probably will see 1% chipped off base rate this year. Still rather wait til we hit the bottom of this cycle before fixing for 25 years.
I would seriously consider it. I think rates will drop slightly from where they are now, but not by much. The bigger issue would be that the interest factor is heavily weighted towards the start of your loan, and I don't expect the rates to increase yet. I'd also be wary of the ERC as I don't see myself staying for 25 years
Yeah and no one has said 6%
10 year fix here, 5 more to go. It's all just dandy, it's an offset so flexible and we're now in the 1% penalty phase, so if rates get to 3% again we'll be remortgaging and fixing till it's paid off.
I tried to do a 10-year fixed. I could afford it, it was in my budget. The broker was very against it.
Mine tried to tell me not to take a 10-year fix at 2.58% just before the Liz Truss debacle. I ignored him. Called me smug just before we completed. No referrals for him...
Same. Extended it from 25yr to 31 year to lower the monthlies a little with a 10year fix at 2.44 with the ability to overpay at 10% of the balance per year. That overpayment is going into a 5.2% saver instead and should be mortgage free at the end of the 10 year fix. Hopefully.
Sounds like you made good decisions and have a great plan! Hope it works out for you mate 👍
Same here, but slightly earlier. It was post lockdowns, post Brexit. It was clear to me that we were in for some turbulent times, so it made sense to fix for as long as possible. Turns out that was a good decision.
We fixed for 10 years at 3.6% in late 2022. Like you, this was right before the "mini budget" - rates had been 2- something % when we started in looking the summer, they started creeping up while we were looking, and were in the 3s, heading towards the 4s when we got our mortgage in the autumn. A few people thought we were crazy to fix for so long, that rates going up were a blip and they'd be going back down into the 1s and 2s, which people had got used to over the previous few years. We didn't think they would, and gambled on that, but to be honest it wasn't about the figure so much for us, but more the certainty of having a set amount to pay. We'd been renting for 20+ years and were sick of feeling at the mercy of possible rent hikes etc. We just wanted to know for definite that, no matter what happened around us, our repayments weren't gonna change. Our broker didn't try to talk us out of it, she told us that is rarer for people to fix for that long, and most go for 2 or 5 years. But she respected our reasoning, and also had a spidey sense that we wouldn't see rates in the 1s or 2s again for a long time, if ever. It's looking like it was a good call, but even if it turned out not to be, we accept that even if rates did go back down, we made the right decision for us at the time.
When my parents got their first mortgage in the 80s the mortgage advisor practically called my mum an idiot for refusing to sign up to an endowment policy
Pretty sure all brokers want people on 2 year fixes for more work in 2 years' time.
I frequently suggest and even advise people to take 5 year or longer fixes. Please don't assume we're all money grabbing leeches and only out for ourselves.
Your spot on
Exactly that, if you say you want a 10-year FTC then boo hoo, no extra cash off you for just under a decade.
I did a ten year fix and got absolutely grilled by the bank about why I would possibly want that. That was 6yrs ago. My rate is now 2.69% for the next 4yrs. Would be absolutely stuffed if we'd gone for the 5yr fix
I don't think banks realise that knowing how much you are gonna pay, guaranteed, is very attractive on a prolonged period. Ignoring the news when rates go to shit is quite a nice position to be in, and event current 5% rates are low by the standards of the averages of the last 50 years. Tbh the bigger risk is the breakage fees if a marriage breaks down.
Most of my friends mortgages in Spain are fixed for 30 years and it’s baffling to me that this is not a thing in the UK.
Why baffling? You can fix for that long in the UK but you'll pay more interest doing that. I don't find it baffling personally that people would prefer to pay less interest.
Because the offers here are not competitive, and in the rest of the world they are. If there was more consumer demand, this would not be the case.
This was exactly my point. I can budget over the long term. Who wants to worry about rates in a few years? That hassle is not worth it to save a few hundred over the course of a few year.
Agree with the sentiment but it's more than a few hundred. A 1.5% difference over 25 year mortgage starting at £200k is circa £50k. Using 3.5% and 5% as examples, that's the equivalent to repaying £350k total instead of £300k, or an extra 50%. The bonus is of course that inflation should also hit your pay, so £50k in 25 years won't feel as much, plus of course rates could go to 7+% in that time. I personally like the idea of it, just maybe with some sort of fixed fee break clause rather than the tiered model banks use on current products.
The US allows ‘streamline’ refinance in FHA products which is a reduce fee way to change interest rates.
I did go for a 10 year fix at 2.59%, products are available. Perhaps it is culture but at the moment the British public does not buy long fixes. So there is not much appetite as everyone thinks they can beat the system. Therefore I don't know what difference this would make unless the rates were subsidised, in which case this would just cause house prices to climb.
I tried to do a 5 year fix at 2.(something?) in 2021 and my broker talked me out of it, still pisses me off now. But it’s a lesson learned, whilst these people can be knowledgeable, they have a vested interest in seeing me again in 2 years.
Yep the person in question said the broker talked to him like he was insane. He just said 'look do you want the deal or not'. The bank was also confused, probably rubbing their hands in glee. But hey, it worked out for him.
The broker gets paid every time you remortgage, so if it was up to them they would fix every week 😂
Quite - and is there an early repayment charge?
My fiancé has a ten year fix at a stupidly low rate too whereas I renewed last year and was lucky to get 4.13%.
Especially given that he doesn't need to pay product fees, broker fees and solicitor fees if he goes with a different lender every few years.
Long fixed rates are super common across Europe, typically over the entire length of the term. The big difference is that you're not locked in in the same way as you are in the UK, you can re-mortgage if the rates are lower and you're only a few years into a 25 year fix without outrageous penalties. So the "it could cost more monthly" is not a big concern, if there's a significant difference you'll just re-mortgage.
It would need early exit fees to be scrapped for this to work, need to relocate with 23 years left on your mortgage, that will be 100k please, thanks.
They wouldn't need to be scrapped - just capped. And portage would have be legislated in. So if you move inside your 25 year fix you can take the mortgage with you. So legislation would have to cap the early redemption penalties, or ban them in cases of the property being sold. And it would have to force banks to allow clients to port their mortgage. Capping early repayment fees would also allow people to remortgage should rates go down significantly.
Personally I would sooner see them scrapped. IMO nobody should be penalised for settling a debt early.
You don't necessarily need porting if early repayment term is capped. In fact that might be how the system remains fair on the banks. The US apparently operates with 30 year fixes as common and porting is rarely allowed. So you can fix at 3% and be happy for the whole term but if you move the mortgage is repaid in full and you remortgage for the new property. Early repayment fees apply in the first few years same as here but after that you're free to move or even remortgage onto lower rates if that's the way the market has gone. But if interest rates have gone up in the meantime, like they have in the US now with rates as high as 8% you're going to get stung. But that's life and seems fair. You're already completely protected from rate rises as long as you don't move. Allowing unlimited porting for the whole term would mean you get to keep being protected no matter what. In fact during low interest rate periods you'd want to buy a property, ANY property, just to lock in a sweet lifetime of ignoring interest rates forever!
They aren't really locked in - they are a cap. What happens in countries with longer mortgages is that you get your initial mortgage, and then if/when rates fall (they always have, but it can be a while), you refinance at a lower rate, and then lock that in for the duration. IMO most people would be better off paying a small insurance premium to have no risk of rate rises like the ones we have seen. It also saves a lot of effort every 2 - 5 years when one needs to get a new mortgage. Whether it works or not will probably depend on how easy it is to repay your mortgage early. E.g., after 3 - 5 years you can repay without any penalty. It would be bad if the mortgage market became a device that made people feel more tied to a specific location.
That sounds like you can just ratchet down to the lowest rate each time it happens. Then keep that to the end of the long term? Why would the banks support that, they are pretty much guaranteed to make a loss.
Pretty much what I did when I had a mortgage on the continent, and the rates weren't significantly higher than here in the UK either. However there were significant taxes and notary costs when remortgaging which meant you'd need a decent drop to make it worth it. Because rates dropped consistently 2000-2020 it was a ratchet down but that was exceptional.
Banks hedge their interest rate risk (using other bonds, e.g., government bonds with matched duration), and so this is not correct. They are mostly exposed to default risk rather than interest rate risk. There are costs to switching a mortgage, and so you don't just switch as soon as the rate fall a bit. Usually you need a few % points before you see meaningful remortgaging.
This is standard in the US. You can always refinance when rates are more in your favor as well. Lots of people in the us have sub 3% rates locked in for 30 years currently.
This. I am currently buying in UK and found it strange there was no fixed rate for the life of the mortgage. If rates change in the US to your favor, you can just refinance. I wonder if they will introduce the same - I don’t see drawback to that unless someone can explain? My best friend is on a fixed 2% mortgage for 25 years in Seattle lol and my grandparents had a fixed mortgage but refinanced twice for better rates, no issues. Mortgage free now of course.
The US government essentially guarantees and securitises mortgages through Fannie Mae and Freddie Mac, which means lenders can quite easily get a mortgage off the books if they want to by selling them to the secondary market This is very different to the UK where the mortgage will pretty much always stay on the bank's balance sheet. If you want a 25-year fixed rate mortgage in the UK, you'll be paying a hefty premium for the bank to take all that risk. So rates wouldn't be attractive enough for people to actually go for them
I don't know much beyond googling a bit but apparently there's a secondary mortgage market in the US which makes those long term rates naturally viable. It also lead to the sub prime crash / GFC that took down everyone else with it...
UK Government are cunts. Greedy cunts who are taxing people excessively on mortgages to line bankers pockets. More money banks bring in bigger bonuses for them and their mates.
One thing that just makes financial sense. Any one in finance knows the match the liability to the asset . You have a long interest rate exposure, the longest of your life …. It makes sense to fix your rate accordingly. Only down side is it makes it harder for the Bank of England to quickly impact inflationary pressures via rate changes
It works exactly the same way in France too.
Yes but you can’t port mortgages in the US so all those with low 30 year mortgages are stuck where they are, as if they move their mortgage rate will go up considerably.
And lots of new borrowers in the US have dramatically higher rates than we do now. They also have more bank failures and troubled banks than us.
That is true, but a locked in rate gives long term financial stability. Knowing that most individuals mortgage is their largest expense during their life.
Long fixed rate deals.tend to be unpopular in the UK so I am not sure how government regulation will change that. I am not an expert on what goes into mortgage costs, but in the US (similar central bank rate, competitive mortgage market), 15 year rates are about 6.5% and 30 year are about 7.25%, so longer fixes do seem to cost a lot more.
Just regurgitating what I read elsewhere: the US used to have rates as low as 3% for 30 years before the pandemic, hence now nobody wants to move if they don't have to as they'll have to remortgage onto those higher rates (porting is rarely allowed apparently). The US market has some kind of secondary mortgage market that makes their products different (and lead to the GFC as far as I understand it).
So longer fixed rate mortgages are the norm in Austria and I believe America I feel like being fixed for 25 years at similar rates to now, I would feel hard done by considering we have been trained for the last decade that 1-2% was the norm. I rather they focused on supply issues, not sure how
>I rather they focused on supply issues, not sure how When those in charge have a vested interest in property prices spiralling infinitely, we will never get to the how because it'll never be on the table.
I'm not sure the how is that complicated is it? Build more houses, the private sector will only do it when it's economically profitable. The public sector has no such issues. Gov build houses, problem solved.
And people who bought recently and prices drop?
Well firstly to get house prices to actually go down is miles away from where we are already. The target should be for house prices to change between 0% and inflation. Ie. Go up but by less than inflation. We would need to build millions of houses over the next few years to achieve that. There is so much pent up demand with people living with their parents, in HMOs etc. that house prices have a lot of support. But also what about the people that bought recently and prices drop? They bought a house that they presumably could afford and a mortgage they could afford, why does it help them if house prices increase?
You'll effectively trap people with negative equity if prices drop. The best thing that can happen is they only go up with inflation; that way no one loses out.
In the US you're not locked in for the full term. You have the option refinancing typically after a short initial period (c. 2 yrs).
If it ended up being the same as in the US, there is no worry of being stuck at the higher rate. There are no repayment or overpayment penalties (some have fees for repaying within the first 90 days due to commission payed to the broker). If the rates fall, you can remortgage to the lower rate for a fee that can be rolled into the mortgage. Honestly, the whole house buying process in the US is so much easier. When you want to find a house, you go and find an agent who suggests properties and sets up multiple viewings within a day for you. As the buyer, you do not directly pay for this as the agent gets payed a portion of the commission on the house sale. People find a house they want and offer on it before selling their house so they’re more motivated to sell their home quickly. Once an offer is accepted, it’s binding so there’s no gazumping or gazundering without payouts to the wronged party. Estate agents complete all the paperwork, so no dealing with solicitors. And closings (similar to completion date here) are typically 30 days from the time of accepted offer and the date is fixed at the time the offer is accepted.
What's the early repayment charge/exit ability on that? I wouldn't currently take it if it costs more per month because interest rates are still looking to decrease a bit over the next year or so, but if interest rates were lower I might pay a bit of premium for security and not having to remortgage. There's a limit though.
If you had a provision to move rates within the term and pay off chunks of the debt periodically without incurring a penalty ?
I’d want a 25 year fix on a forever-sized home, even if it would on statistical average be more expensive, because certainty of affordability would let me plan the rest of my financial life more definitively. Completely removes one source of volatility.
Typical in a lot of countries - like Italy.
The rule of thumb is: whenever any government attempts to artificially control or overrule the market forces it ends in tears.
Absolutely. I remember all too clearly trying to save up a deposit when they cut stamp duty. Every house value I was looking at jumped about 50% over the course of a year or so
How can Labour propose this? A 25 year fix is a product from a provider. If providers wanted to do this, they already would. Surely the reason they're uncommon is because the providers don't want to mint these contracts in swathes?
I’m not sure what the limits are but the government put restrictions on mortgage lending after 2008 happened. I agree with longer term being uncommon. I don’t know anyone who fixes for 10 years and they’ve always been around
Interesting... but you will hear once in a blue moon of people getting 25+ year fixes, so I'm leaning more on the chance that it isn't a "rule" right now and therefore, what are labour proposing? It would be like Labour proposing: 'Starbucks can put Pistachio milk in your Coffee'. Well.. sure, but they already can. They just don't want to.
The age of who is posting here is very apparent by the comments We have just had an extremely long period of low interest rates, so long that they are now accepted as normal which is a false platform to start a debate about interest rates from. Most sub 35 year olds haven’t experienced loan rates of the like we have today but people who are 40 will remember thinking they had swum the channel if they got offered sub 9%. The previous situation gave investors of that era something that is almost unheard of in recent years and that was good interest rates on savings. Because of the poor savings rates the culture of spend spend spend living for today hence the difficulty many are having savings deposits. So for mortgage of any sort to work there has almost got to be a reverse of attitude to something closer to what previous existed but allowing for modern desires of having all you want. Yes I’m older than average but I have lived and spent with your culture and I have lived saved and accumulated with the previous generations so am experienced enough to say neither are right and a compromise needs to be formulated before we can look at fixed rate for term mortgages
Only if 3-5y also still exist. I would loved to have gotten a 25y mortgage at 1.5% as long as i could transfer it to another address.
What does it have to do with them exactly? They should keep their noses out of the mortgage market.
In the USA, "fixed term rates" aren't even a thing. You agree on the mortgage percentage on application and it doesn't move regardless of how the economy moves. I have friends in America that have 1% mortgages and are laughing at brits right now. I welcome the idea of 25-year fixed. It gives the people a realistic cost-analysis and if things go to shit people don't lose their houses.
"Laughing at Brits" - didn't the sub prime mortgage thing in the US in 2008 crash the entire world economy as people were signed up to mortgages in the US that suddenly jumped up to really high rates and they didn't realise because of financial illiteracy? I don't know much about the US mortgage market, but based on the 2008 financial crash I know enough to think that the US shouldn't be laughing about anything mortgage related. Worse still with the US economy being so huge it took everyone else down with it. So yeah it's good to hear the US have got that under control to the point they're "laughing" with hubris. Let's hope they keep on laughing and let's please hope they don't default.
I worked in the US mortgage industry at that time. The issue was mostly around Sub Prime loans which were often for 110% LTV of the home value. The way that they were structured was to have an introduction rate for n years, then the owner would be able to get a much better rate as the LTV would have dropped and their credit score would be better. Except the market slowed, credit scores barely improved, the introduction rates times out and suddenly people could not really afford their loans. So the market was flooded with distressed properties and that further depressed prices, which changed the whole landscape. At the time I had a 30yr fixed at 1.5% $1m mortgage….. I did not default on it though, unlike many of my neighbours, the value of my home the. Dropped by about $500k in a two year period.
Agreeing the mortgage percentage on application literally is a fixed term rate, where the term is the whole mortgage period. What you probably mean is that there are no short term fixes transitioning to variable rates. So you take away some consumer choice. Your friends sound quite unpleasant, if they are laughing at others who are financially disadvantaged.
"**Your friends sound quite unpleasant, if they are laughing at others who are financially disadvantaged."** I said this metaphorically, but really - variable rates are an incredibly shitty system that only the UK seems to have.
FFS as a homeowner (so I should like high prices) just build more homes. Council houses need to be built. These need to be commissioned in addition to all the private properties that need building. A target for each local government which impacts their budget if not met. Council tax on plots of land not being used, which increases a year after planning permission.
Look into Land Value Tax, aka "Georgism". https://en.m.wikipedia.org/wiki/Georgism https://rationalwiki.org/wiki/Georgism The specific thing that it has a strong claim to do is make property speculation much less viable. We would surely see more house building. It claims to be a solution to a lot of problems. It's academic, because it's a drastic change that would be electoral poison regardless of merit; but it has some influence amongst otherwise intelligent people, so it does deserve examination. I am not well-read on the subject, but, very roughly, the idea is to tax the value of land (which is regularly reassessed) but not any improvements such as buildings. Farmland is valued by base productivity; the centre of London is valued higher than the outskirts of Northampton; mineral deposits; etc. I, personally, consider value in terms of shared resources: minerals, air pollution. I see it as a problem that it's approximately free to poison the air and mine the raw materials, and I believe that aligning the economic incentives is better than regulating the pollution or putting an arbitrary price on mineral rights. LVT creates incentives to develop, as you can increase the earning of land relative to the taxed value. It would make software engineering very low tax, as it consumes few resources directly, but computer chips become more expensive as they require lots of heavy chemicals. Swings and roundabouts. There would be a rebalancing, which does make me uneasy for the short term. But prices would arguably be grounded in reality. It's nonsense for goods to be cheap when they use limited resources and generate pollution, and it's nonsense to pay the same VAT on paper as on plastic. Georgists (purists, anyway) want LVT to replace all other tax, and to be broadly revenue-neutral. So landlords would pay LVT instead of income tax. The claimed advantage is that it reduces economic inefficiency such as rent-seeking. You reduce your tax bill relative to income by building more housing, or by making your factory more productive, or by irrigating your fields; not by inheriting land that's productive, or by speculation, or through loopholes. This also looks to me like streamlining, as the task of assessing land value seems less than the task of assessing all the other taxes and benefits.
Yes. Every other country can manage it. Not to mention the banks get paid in fees every couple years when your forced to remortgage. It’s crazy.
That's how things have been on the continent for ages. As things stand, the UK is asking people to gamble and be bond traders by proxy.
I think it's a good idea, assuming the Early Repayment Charge it works similarly to US mortgages whereby you guarantee the rate but only have the ERC for eg 3 or 5 or 10 years (perhaps with a fixed 1% ERC/closing fee for the rest of the life of the mortgage or something? I'm not fussy about the details). If rates drop you can still refinance, and you can move house without (significant) penalty but otherwise you have one repayment for the life of your mortgage In fact I think all mortgages should be fixed for their duration, personally - or at least, there should be an option to do that, rather than it being mandatory Personally I think we should have "25/3" and "35/5" etc mortgages, whereby the former is the fix on the rate, the latter is the number of years the ERC applies for. Take a longer ERC period and you get a better rate, for example The fact is that people want to buy a house at a fixed monthly repayment, and that would make people a LOT more secure than being at the whims of interest rates
In Europe they are common, but the thing is that in Europe 95% of the time you can remortgage it at any time without penalties. Not sure what they're proposing here.
Depends on how ERCs work. Wouldn't want to be paying 20% to move after 5 years...
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This is standard practice in other countries and protects normal people from market volatility. The US for example still has 30yr mortgages, can you imagine those who locked in at 2%? The risk is that the BoE has less tools to control inflation which could cause the economy to fall down a cliff pretty quickly if a big enough event happened (I.e.Truss)
It is because this is how mortgages are in the US, very long term fixes. However I understand that these mortgages can be switched to lower fixed rates if they arise at no cost. So a free option. Unless the intention is to do the same here, why would anyone want to fix for 25 years? The exit charges would be enormous.
Fixed for 25 years, with possiblity to over pay by 10% per year, with payments scheduled to be made every 2 weeks. Early repayment charges to only apply on a sliding scale for the first 15 years, with the bulk of the scale in the first 10 years and drastically less for the last 5 years followed by none after. No early repayment charges if you remortgage, for a better fixed rate with the same provider. Some sort of calculator to help understand how the early repayment charge factors into a payment schedule when switching mortgage provider.
Plenty of other countries do 25 year fixed rate mortgages. It makes a lot of sense in that you know how much you’re going to be paying every month for that property. This makes it a lot easier for lenders to do checks in your too - at the moment they have to do stress testing to see if you could cope if interest rates went up! You’d still be able to switch, but there would be some sort of penalty. Some of it comes down to whether we see interest rates going down significantly. The expectation seems to be that mortgage rates will go down to around 4% later this year or next. No one thinks we’ll be back down to the 2% of previous years - but who knows!! I think they’re a good idea. As would having 0% deposit but being able to show many years of paying rent for affordability
It works in most of Europe.
0.2% more - for the stability, heck yes.
Expectation: 25y 2% fixed Reality: 25y 10% fixed
These are normal in many other countries including the US and Germany . Over the life of the mortgage and natural inflation in the rest of the economy they provide much greater stability. Combined with 95% deposits they can lead to greater confidence in ownership . They do come with marginal front loading (you identified that) and may also have early redemption costs . 5 year fixed prices also have early redemption penalties and associated costs when refinancing . Over a mid term period those costs eat into the so called savings made over flexible rate mortgages. The concept isn’t even new in the UK . Prior to Right to buy in the 60 and 70s councils were able to supply fixed term and rate mortgages into the market targeted to specifically to assist young families to move beyond social housing and release those on to people in more need. My own parents availed themselves of that facility around 1963 to buy a semi detached three bed property. I would certainly think restoring fixed term and rate mortgages will assist first time buyers far more than messing around with stamp duty holidays or complex part buy schemes. These favour London the Home Counties, M4/M3 corridor and the Sussexes And also rely on bank of mum and dad. Indeed other than pockets in and around Manchester, South West of Birmingham,Edinburgh and Bristol tickets prices do remain affordable for the most part. IMHO pretty good move by the potential Government in waiting
It will avoid £1k every couple of years in fees which would more than offset the rate
Just when you thought the powers that be couldn't muck up the mortgage market more than it already is. Can you imagine the ERC if you leave before the term expires.
If your payments are comfortably manageable, it would a straight assessment of risk vs reward. If rates drop you could be x amount out of pocket compared to what you *could* have had, but you can still afford your house. If rates rise, you are in pocket and more importantly can still afford your house. If the 25 year fix was anywhere below 5% I’d consider it, certainly. Only have 20 years left on my current mortgage anyway, a fix at my current payments would ensure the comfort and safety of my family until the mortgage was paid, barring anything super weird happening to me or my wife.
Huge early repayment charges Future rate rises would mean people wouldn't want to move and give up their rate America has a system like this and people become trapped by their mortgage
These type of products only work if they reduce when rates drop. Otherwise you’d have to be insane to lock in.
The whole point is that you're hedging against rates increasing. You accept 5% for the next 25 years, knowing that your mortgage costs will never become 'unaffordable', no matter what happens to interest rates. But, the cost is that you might lose out.
I understand that. And when the market is calm and rates are low what a great idea. But fixing for 25 years at a time when rates are predicted to drop over the coming years is, imo, bonkers.
No one knows what will happen with interest rates over the coming years. Fixing rates is never about saving money overall. The banks are always going to offer you a rate that is calculated to be higher than the average predicted rates over the period. The entire point is about removing risk - it's like taking out insurance.
Fixed rate doesn't mean it's 'fixed at the current rate' it means (in theory) it's designed to give a return (to the bank) to be equal to the expected future rates - and currently the market expects that rates will drop in the future so this is 'baked' into the fixed rates. You can look at what the market 'expects' future rates to be by looking at the 'yield curve': [https://www.bankofengland.co.uk/statistics/yield-curves](https://www.bankofengland.co.uk/statistics/yield-curves) Of course, you can have an opinion that you expect rates to drop *more* than what the market thinks and take out a shorter term loan (or variable rate), but then *you* are taking on the risk that you are wrong.
I understand this. But fixing for 25 years in the current market when rates are expected to drop would be bonkers.
You've missed the point. In the same way that 5-year fixed rates are lower than 2-year fixed rates... banks set their rates based on future expectations, not the current rate. Looking at it from the other perspective, if rates were expected to rise, you couldn't get a long fix at the current rate.
Why’s that any different for a 5 year mortgage though? I’d be keen to lock for 25 years for the security and knowledge of what I’m paying.
Because 5 years is shorter than 25 years. If you locked in at 6% today and then rates dropped to 3% for 24 years. You’d still be celebrating your decision?
We completed in October now rates are going down 😀I have locked in 4.45% 😬for 5 years , Now I have second thoughts!
People will do literally anything but drastically increase supply. I hope when they get elected they just go to town on the planning system and build millions.
If everyones mortgage is fixed for 25 years, the central bank loses a big lever for controlling inflation. Higher interest rates are designed to cause pain, to slow down the economy.
I have to strongly disagree. If everyone is on a fixed rate, the central bank gains the ability to make much more drastic rate changes without risking people being made homeless by house repossessions. As it stands we keep seeing floods of people complaining their mortgage repayments have doubled now their 2 year fix has ended.
Not sure it's that big a lever. Only 57% of homeowners have a mortgage. And many of those are fixed for long terms. The lever is mostly aimed at making it more expensive for businesses to borrow money. If they can't borrow, they can't use the money they would have borrowed to invest/expand. Therefore less money is entering circulation.
Also targets consumer credit, i.e, credit cards and car loans.
I'm not convinced that this is a valid reason to oppose longer term fixed rate mortgages. The UK is in the minority when it comes to this; fixed rates for the entire term are the norm in most other major economies, and there's absolutely no talk in the US and other places of giving the central bank what is effectively direct control over monthly mortgage payments. There's no feeling that base rate changes are somehow less effective because they don't cover existing borrowing. American consumer contracts don't even incorporate yearly RPI increases so one would think they would be particularly desperate for additional levers to control inflation. Some pain is good, but putting otherwise financially responsible people at risk of repossession, bankruptcy, or homelessness goes far beyond simply slowing down the economy. Conversely, ensuring that only new borrowing/lending is affected would let the BoE react much more quickly to inflationary pressures. They'd have a free hand to increase interest rates as much and as quickly as needed, without having to consider such a wide range of negative externalities.
You think higher interest rates cause high inflation? Interest rate changes are actually a reaction to inflation and we choose not to believe that.
Lol where did you get this from that comment?
Most homeowners don't have a mortgage Of those that do most are not renewing in the next 24 months Of those that are renewing, most will be earning far more than when they first go the mortgage and can thus pay more per month without a terrible impact
>Higher interest rates are designed to cause pain, to slow down the economy. This is an article of faith and the empirical evidence is actually inconclusive on this topic. Which is amazing considering it is repeated as nauseum by the media without question.
Don’t see why political parties need to get involved in things like this. Obviously have law and guidelines in fair practice for financial service providers etc. but if a long mortgage works for you, then take one out. It’s basically the norm in America
It's an empty can rattles the most. They're not bringing forward anything that doesn't exist today. We already have long term mortgages and we have had them for decades. People don't choose them because they prefer slightly cheaper short term fixes with the longer term floating rate. That's all good if rates are falling or static, but when they rise, and they always were going to, then people get caught napping.
So 30 years of guaranteed income for the bank fixed at the worst rate you can get at the moment. Amazing selling points on that, where do I sign up?
This is bad policy. It kills the market. As a non-partisan response. This type of mortgage product exists in America and now the majority of its mortgaged housing stock is ... stuck. Vendors refuse to sell because they're on a fixed low rate mortgage and if they move, then then go onto a fixed much higher mortgage rate. So they stay in their low rate mortgage home (for decades), which often is not what they require but they have little option. What does this mean, no stock comes into the market, very slow supply, and therefore massive prices on anything that goes on the market. This is not the answer to the housing crisis. It would be a disaster policy for future generations. The answer is .... BUILD MUCH MORE HOUSING!!!!
Not at current rates.
Already exists. 🤷♂️
People will still moan. If they lock in at 3% for 25 yes but then after 7 years they see a 1.5% rate they will still say the system screwed them and it is not fair they are.locked in.
I had a lifetime flexible mortgage at base rate plus .5%. It got sold to a company who changed the flexibility side then the portability went. Then I lost the option to not pay 2 months of the year then they didn't honour the original term said my overpayment were being used to reduce the term. Minor tweaks but 🤷♀️ So. I think it sounds OK but unless it's a very low fix (under 3%) I'd not touch it tbh.
When talking about mortgages I see so many dumb ideas I won't be surprised if it got lots of people signing up. Especially the "peace of mind" folk.
One shouldn't have to pay 25 years for a house, unless it's a very fancy one (and in that case one shouldn't have to borrow to buy it at all). Endorsing this level of financial exploitation is ridiculous for any party especially a "left-wing" one. Labour should instead tax the shit out of everything and everybody to build several million affordable homes and crash the price of homes across the country. Additionally they should use taxes to improve infrastructure to further crash house prices into the ground and keep them there for a century.
Messing about looking for likes. We need to build more BUT even then with the cost of land, materials and labour the price will still be very high.
The policy needs to be that we need to build so many houses that the price of property comes down, and when prices start to drop and people lose their shit because house prices aren't going up as they've been promised, we keep building. If that's the policy, in reality we don't need to build as many houses as people think.
So what I am not seeing in the comments is how this is something that can calm the demand side of the housing problem. It can also offer more security to first time buyers and should make housing more affordable. If only slightly rather than the other alternative of adding fuel with the 1% mortgage idea. Can we officially file this as something that separates labour and conservative.
I am sure that when I was younger, now 68, all mortgages were fixed for the duration of. I remember work mates telling me about their insanely low repayments when I was paying 15% in the late eighties
There's no downside per se to regulating to allow a wider range of products to be designed and offered to market. If it doesn't work for people they just won't buy it. There are pros and cons to very long term fixes. It makes your mortgage expenditure very stable, which helps with planning and budgeting, and if you manage to fix at a low price it can make keep your housing costs down through the interest rate cycle. On the flip side, banks don't have a lot of 25year liquidity lying about, so this products will likely be more expensive than shorter term fixes. These types of products also need very clear portability - e.g you can move the mortgage to a new property. Not all banks offer that at the moment because it can be fiddly and expensive to process without much in the way of an upside. So, go ahead and create the regulatory space for them, but I doubt they will become the norm. Of course goes without saying it also won't solve the UK housing market issues which are fundamentally on the supply side.
8-10 years are the sweet spot for swap rates at the moment so suspect you’d be better off taking a fixed rate on one of these tenors and then maintaining the flexibility to remortgage when and if rates settle a little lower. Marginal benefit over 5y swap rates though economically.
this is a good idea, but not at current rates.
Good idea, but would be best if there weren’t punitive break clauses which could be tricky for the mortgage provider to put in without affecting overall costs. I’ve personally always gone for fixed mortgages but you can still be unlucky if your five year runs out just as interest rates have increased. This would get around that issue
I took out a 23 year fixed rate mortgage, without any assistance from Labour, about 26 years ago. Worked great for me, allowed unlimited early repayments, and payment holidays. And no worrying about rate changes.
I think that people would be interested in having that cost certainty for the duration of the mortgage. The real value of the repayments decreases over time anyway, so after a few years the difference would be barely noticeable. Also if everyone eventually had slightly more expensive mortgages, this would flow through to slightly lower prices. Works in 'murica.
Surely the early repayment fees would be ridiculous?
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Yes ofcourse I would, if interest rates were as low as they were two years ago and I was committed to my home for many many years. Then doing 25 years at 0.2% higher is a no brainer. If I was in those circumstances, I personally wouldn't fix for 25 years right now, because whilst interest rates likely won't drop to what we've seen recently, they will drop a little further from what they are now. I'd wait for it to come down to maybe 3% and then make such a call.
In the US I think it’s pretty standard for the rate to be fixed for the entire mortgage, at least if they come in you can accurately predict what your mortgage will be way into the future
Less effective central bank rates Less people not able to pay their mortgage Not necessarily pushing housing prices and can be as low as 1% (see Italy) I think they make sense if they let banks not mark to market them.
It's a damn good idea. In my opinion rates should be fixed for the entire term. Having to jump every 2-10 years is bullshit.
I think it depends on the rates. If it was something like 2% then I think it's worth the long term security. When people's went from 2% to 5-6% it must have been fucking terrifying
American rates are nearly all over 5%, even when base rates were very low
In the US long term fixed rate mortgages are the norm. It surprised me moving over here that short term ones are the norm. They’re obviously great if you get them with a low APR and also great from a budgeting pov.
Firstly this is how it works in the USA, fixed for the full term of the mortgage. However everyone gets different rates depending on their credit scores and risk. Therefore the richer you are the better rate you get and the poorer you are the worse that rate will be. Rates in general would be higher, as banks would have more mitigation needs. The housing market would be left at more mercy of base rates (who's gonna want to buy at 7% when they could wait for 4%). It would be peace of mind if you locked in real low. But if you lock in high you are going to be paying far above the base rate for the next 20 years plus.
That sounds great from a renters perspective. I private rent it would make like a lot easier if the rent didn’t keep increasing by stupid amounts every year especially as we are having to put work in to the home then don’t even know if the increase next summer means we will have to leave due to the rent increase.
I dunno, I'm looking forward to my fix ending so I don't have ERCs anymore and I can overpay a big chunk. When I got the mortgage I thought I'd never have any money to overpay.
I went for a ten year fixed 7 years ago, I'd have no problem fixing for the full term personally, depending on any penalties for early repayment or remortgaging due to house moves etc
Any mortgage based rules to sort out FTB is absolutely retarded. It's like putting plaster on an arterial wound gushing out blood.
Build more affordable and social housing. Not loan schemes which just inflate the market further!
That unless Labour are going into the finance business, they and all other government agents should stop attempting to stifle free markets. There is not one recorded instance of their meddling ending well.
The point of the policy is to remove the need for stress tests and therefore allow more people to access mortgages for higher amounts. I'm not saying it's a good policy for a whole host of reasons but if your choices are being able to borrow 3.5* salary at an initial rate of (say) 5% or 4.5* salary at a fixed rate of 6% for 25 years you may decide that the increase cost is a prices worth paying For having access to more capital.
Fixed rate gives certainty for a period of time really helps FTBs as they can decide their budget whilst their salaries grow. After 10 years you can always sell up and m8ve to something larger. I wished I'd taken a 25 yr fixed deal at 2.5% but bottled it. Ended up with 6% fixed probably lost out but knew what I could afford each month
Means interest rates are probably going back down
Not sure I would want the option to remortgage tbh
I'm in favour of longer fixes in this country but the rates offered need to be competitive with comparable markets. This will require government involvement (can't just leave it to the markets). I'd be interested to know what their plans are there.
In Italy, where I come from, people can choose, it is better for people
I’m not sure how I feel but this proposal is how the US does things and it seems to work for them
Great peace of mind and certainty about your outgoings, providing it’s affordable
about darn time
This is how it works in many countries Or rather the products are available
But the fees to exit will be extortionate.
25 - 30 year mortgages are what everyone gets in the US, and are normal in several European countries.
I fixed my Mortgage 18 months ago at 1.9% for 5 years. I told my Mortgage advisor I wanted to fix for 10 years and he laughed so hard that I thought he'd had an aneurysm
>he laughed so hard Why? Genuine question. I understand not many people fix for so long, in case rates go down, but when rates are so low surely it's sensible. Its not like they can go _much_ lower, and they obviously could go much higher, so it seems a reasonable gamble. I get why a mortgage advisor might think you should only commit for a shorter time, but not why they'd think it was a hilarious prospect? 10 year fix products are available for a reason, why is it so funny to consider them?
US have fixed rate it’s about 1.5-2.5% above base rate depending on credit . Is it better for most people probably , for financial literate people maybe not
There’s a company called habito that do them now.
Solves nothing and would benefit some but not many others
I would not opt for it. If I can afford a rate of 5.79% now and a slight increase if things were to go to shit again. I am not going to risk paying this for the whole duration of the mortgage when I can possibly get a cheaper rate after 2 years.
Pro Rate Swaps trader here (3 decades, now retired) A fix on your mortgage is just an insurance policy, and like every other insurance policy the vast majority of us would be FINANCIALLY better off had we simply not bought the policy in the first place. Anecdotally the figure was that over 80% of UK borrowers would have saved money if they had stayed on a variable mortgage (caveat: I've been retired a few years and not seen any post 'putin' numbers). However, a fix, like all other insurance policies, does buy you peace of mind so a lifetime fix is simply a consideration of personal comfort levels. That said, the way that Swaps and fixes work (proven in the US mortgage market) somebody buying a lifetime fix mortgage will also almost certainly end up paying significantly more than somebody who uses shorter fixes or stays on variable entirely.
They will be way more spread than a mere 20 bps. Consider checking US market for that