- Number of fixed deals over 10 years reduced from 15% to just 3.5%.
- Size of mortgage market recovers.
The number of long-term fixed-rate home loans has been slashed in the past year as the mortgage market dramatically switches to shorter term deals, according to MoneyExpert.com.
The independent price comparison website says the proportion of fixed-rate mortgages available with terms over ten years has slumped from 15 per cent of all loans in July 2008 to just 3.5 per cent of the market now.
In the year to July 2008 long term loans were increasingly popular, with the proportion of fixed rate mortgages with terms over 120 months almost doubling as borrowers turned to long-term deals to battle the credit crunch.
But now cautious lenders have all but abandoned the long term deal with just 39 of the 1,110 fixed rate mortgages on the market offering terms of 10 years or longer. A year ago there were 137 similar products available to home buyers.
However with interest rates plummeting the cost of a long term mortgage has actually decreased. According to MoneyExpert.com, mortgages with fixed rate terms of ten years or longer come with an average rate of 6.14 per cent, down from 6.67 per cent 12 months ago.
Pierre Williams, Head of Research at MoneyExpert.com, said: ìThe early throes of the credit crunch sparked a flight to safety as borrowers who had been stung by dramatic rises in the rates on short-term deals turned to the relative security of long-term mortgages.
ìLenders were increasingly keen on signing customers up to long-term deals because they felt the products offered some certainty for their mortgage books.
ìBut in the past year the full force of the economic downturn has compelled lenders to reappraise their mortgage books. Long term lending is a thing of the past unless you are a very, very safe bet with a large deposit. Lenders are forcing their customers to take a risk on the unknown direction of future interest rates.”
The MoneyExpert.com analysis also shows that the number of 25-year fixed rate deals has dropped from 18 to just one in the past 12 months. Kent Reliance Building Society still offers a 25-year mortgage with a rate of 5.98 per cent.
Encouragingly for borrowers the size of the fixed-rate mortgage market as a whole is on the increase. In the past 12 months the number of fixed-rate deals has gone up from 921 to 1,110 ñ a 21 per cent increase over the past year.
Pierre Williams added: ìLong term deals may be disappearing but the size of the overall market is growing. That means more competition in the marketplace that should translate into cheaper prices. Home buyers will also have more choice, which can only be a good thing.”
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