Chancellor Darling Would Like Longer Fixed Rates
July 16, 2007 by admin
Filed under News, News-Mortgages
New Chancellor of the Exchequer, Alistair Darling, has indicated that he would like to see longer terms for fixed rate mortgages in the UK.
Darling would like to see more fixed rates lasting up to 25 years and on Monday 9 July he pledged a shake-up of the housing market following concerns that have been expressed regarding lenders only offering short term fixed rates in order to maximise their profits.
If homeowners have to renew their fixed rate deals more often, they will be liable for thousands of pounds worth of charges in arrangement fees, which have rocketed in the last couple of years. As interest rates have risen five times in the last twelve months, consumers are looking to fix their interest rates so they know what their payments will be for a reasonable period of time, but the number of deals beyond two years are few and far between.
The Chancellor said that longer-term fixed rates were available around Europe and would be useful in the UK to reduce volatility. He was unhappy with the incentives built in to products that meant mortgage brokers were more likely to advise homeowners to choose short-term products – and the associated high arrangement fees – some now nearly £2,000.
Mr Darling said that the Financial Services Authority have noted the problem of brokers wanting homeowners to return to them every two or three years rather than every ten or twenty.
The Chancellor also talked about the possibility of building on greenbelt land in the future as the lack of affordable housing in the South East in the last five years was now becoming a problem for the whole country. Last year’s Government target of 223,000 new houses was not met with only 160,000 being built. Mr Darling agreed that planning is a sensitive issue, but whilst determined to protect Britain’s heritage he said that if we don’t increase the supply of houses the problem will get worse and worse and worse. There was no way he would accept that housebuilding should stop.
Ex-Chancellor Gordon Brown, now Prime Minister, oversaw house prices that trebled between 1997 and 2007, and promised to end the boom and bust cycle in house prices, but as it is evident that we are coming to the end of a boom cycle in house prices, both Brown and Darling will be hoping that we don’t enter a bust period of falling or crashing house prices. However, with interest rates having risen from 4.5% last August to 5.75% last week the increased payments to be found by most homeowners will bring about a slowdown in the market.
Malcolm Harris, CEO of Bovis Homes, yesterday warned that any further rate rises could bring the housing market to a grinding halt. Average mortgage payments are now at a record level when compared with how much people earn.
Mr Darling acknowledged that housing is a huge issue and concerns more than the buyers, with parents and grandparents keen for their children to be able to afford housing, but a monthly repayment on a £125,000 mortgage s now £130 higher than it was last year.
Tom Smith
16th July 2007
