Housing Minister Calls for Longer Fixed-Rate Mortgages

Housing minister Grant Shapps urged lenders today to begin offering potential homebuyers 30-year fixed mortgages to stabilise the market. Addressing a London seminar of mortgage providers and other stakeholders, he said that fixed mortgages of up to 30 years needed to be part of the choices offered to borrowers, and that such options should be a “normal and sensible choice”.At present, there are no mortgages which offer fixed rates for a normal average lifetime, and a far larger deposit is required to establish a longer-term fixed deal. Mr Shapps argued that “in today’s uncertain world, people want to know where they stand. Yet when it comes to buying a home, there are no mortgages available for them where they can fix their payments for a long time – the longest fixed-rate mortgage for many is five years”. “Longer term mortgages – possibly as long as 30 years – could help families on tight budgets know exactly where they stand when they’re buying a home, by giving them greater certainty over how much they will be paying for their home in years to come,” he said. Responding to these ideas, Building Societies Association head of mortgage policy Paul Broadhead told the PA news agency that it welcomed an “inclusive debate” on “any measures which will help lenders lend and consumers borrow and also backed the minister’s goal of “a stable and, we presume, active housing market”. However, he said that the challenge for fixed rate mortgages was to strike a balance between consumer flexibility and the cost, noting that “the more flexible a fixed rate is the more expensive it is for lenders to fund with the knock-on higher cost to consumers.”