37% of borrowers would like a 25-year fixed rate mortgage

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by Lin Freestone

A survey conducted by finance website Fairinvestment.co.uk has revealed that 37% of people questioned would take out a 25-year fixed rate mortgage if they could.

The certainty of no increases in mortgage payments for the duration of the mortgage would enable long-term budgeting, appealing to more than a third of the people surveyed.

However, 25% of people asked said they would still prefer a short-term, fixed rate mortgage, such as those available at the moment. Just 6% expressed a preference for a variable rate mortgage, with their repayments reflecting changes in interest rates and going up or down.

A further 28% said they had no interest in such a long-term fixed deal. They preferred a medium-term fixed rate mortgage.

The Chancellor of the Exchequer, Alistair Darling, announced last year that he was investigating a number of new initiatives that would improve the way the mortgage market works, including making it easier for lenders to offer 25-year fixed rate mortgages.

The House of Commons was told that the Chancellor will work on creating a regime for covered bonds, which would help mortgage lenders finance more affordable 20-25-year fixed rate mortgages.

In the 2008 Budget in March, the Chancellor said that he will look into how to deliver more affordable long-term fixed rate mortgages and will provide an update in the Pre-Budget Report later this year.