Long-term fixes 'will not help first time buyers'

13-Nov-2007

Plans to introduce a series of ten-year fixed-rate deals across the mortgage market are unlikely to make things any easier for first time buyers, Stroud & Swindon Building Society has said.

Chancellor Alistair Darling had previously advocated such deals as a way for borrowers to shield themselves from volatile interest rates and to avoid the common phenomenon of "payment shock", where borrowers find themselves having to remortgage onto a deal at far higher rates than they had previously been paying.

But the building society's research has shown that borrowers looking for their best first mortgage could be paying as much as £10,000 more over the duration of a ten-year deal.

A mortgage comparison shows that those who opted for a series of two-year fixes between 1997 and 2007 would have paid around £78,000 on a £100,000 mortgage over the period, Stroud & Swindon's study has shown, but those on a typical ten-year deal would have paid around £88,000.

"Whilst it is obvious that something needs to be done in order to help first time buyers get on the housing ladder, the current ten-year mortgage deals are not necessarily the right solution," confirmed Stroud & Swindon sales director Paul Chafer.

"First time buyers are usually on a very tight budget so any saving they can make on their mortgage repayment helps," Mr Chafer added.

Elsewhere this week moneysupermarket.com has also warned that long-term deals carry with them the prospect of borrowers having to pay a hefty exit fee should they decide to change deals after two years.

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