Long-term fixed rate mortgages risky because of life uncertainty

Buyers tempted to take out a long-term fixed rate mortgage after chancellor Alistair Darling indicated in this week’s budget that action might be taken in future to promote them should be on their guard.

A number of experts have warned that the certainty that Mr Darling pointed to as the benefit of opting for a mortgage with the interest rate fixed for ten years or more is precisely what is missing.

“Uncertainty is the key deterrent,” Andrew Haggar of Moneyfacts told the Daily Telegraph, pointing to the unpredictability of life circumstances over such a long period of time.

“While borrowers can insure against unemployment and illness, people are still wary of tying themselves to a fixed rate for an extended period of time.”

Nici Audhlam-Gardiner, director of mortgages at Abbey, agreed.

“So much can happen in a quarter of a century, both to a customer’s circumstances and to the economy. While these very long term deals may be suitable to provide long-term stability for a small number of customers – they will not be suitable for all,” she said.

Tags: long period, interest rate, Telegraph, budget, extended period, unemployment, deterrent, Business Finance

‘Disappointing Budget’ does not encourage savers to use Isas

The new Budget from Alistair Darling is “disappointing” as it does not encourage savers to use Individual Savings Accounts (Isas), one financial expert has claimed.

According to Nationwide, the Chancellor could have gone further in promoting the product to consumers by ensuring that they were more flexible, and index-linking them to inflation.

A spokesman for the company said: “Additionally, we would have liked to have seen the Chancellor introduce a withdrawal buffer that allows savers to make withdrawals and replenish their Isa within the same tax year, as this would particularly help people on lower incomes.”

The firm said it hoped that Mr Darling would do more to re-evaluate the Isa system in future budgets to try and encourage consumers to make full use of their Isa allowance and embrace the tax-efficient benefits they bring.

Meanwhile, according to the Daily Telegraph, recent research from Lloyds TSB revealed millions of savers are missing out on tax-free interest as nine in ten Brits fail to make the most of their individual Isa allowances.

Tags: withdrawal buffer, Brits, Product Recall, nationwide, incomes, Telegraph, United Kingdom, tax-efficient benefits