Fixed-rate deals not necessarily the answer

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by Kay Murchie

The chancellor, Alistair Darling, has announced this week that he will examine the possibility of increasing the number of long term fixed-rate deals available in the UK so that borrowers are not affected by large hikes in repayments when their short term fixed-rate deals run out.

According to Moneyfacts (the money search website), extending the length of a fixed-rate mortgage in the UK is not guaranteed to provide the answer to affordability problems. Although, longer deals can also be a risk.

Moneyfacts commented that a long term fixed rate deal does guarantee that the repayments will not change but if the variable rate falls below the fixed rate level, the repayments will not fall.
Nationwide Building Society has confirmed that it is re-launching its 25-year fixed rate offer at a 6.39% rate.