- Number of fixed deals 10 years or more doubles in credit crunch
- Mortgage market shrinks by over 40 per cent
The proportion of fixed-rate mortgages available with terms over ten years has almost doubled in the past 12 months as borrowers and lenders increasingly turn to long-term deals to beat the ongoing credit crunch, according to analysis by MoneyExpert.com.
The independent financial comparison website says the percentage of the fixed rate mortgage market offering terms of 120 months or more has risen from eight per cent of products in July 2007 to 15 per cent now.
And its analysis shows that there are now 18 different 25-year fixed rate deals on offer from five different providers. In July 2007 there were only 9 such deals available.
The shift to long-term deals is emphasised by the dramatic drop in the number of mortgages on the market. While the total number has slumped by 647 products over that period – a shrinking of some 41 per cent of the market as a whole – the number of long-term mortgages has increased from 127 products in July 2007 to 137 now.
MoneyExpert.com says that the average initial rate payable on a 25-year fixed rate mortgage is 6.56 per cent, 0.3 per cent lower than the current market average of 6.9 per cent. A year ago the average rate of a 25-year fixed rate mortgage was 6.38 per cent.
And the average rate of a long term deal, defined by MoneyExpert.com as a fixed rate term of ten years or longer, is 6.67 per cent now compared to 6.39 per cent 12 months ago.
Sean Gardner, director of MoneyExpert.com, said: "The credit crunch has prompted a flight to safety by borrowers who have been stung by dramatic rises in the rates on short-term deals. At the same time lenders are increasingly keen on signing customers up to long-term deals which offer them certainty."
"Long term fixed rate mortgages are no longer an oddity. And with competitive rates of interest in some circumstances they may well be worth considering."
"However early redemption charges on long term deals tend to be more substantial than shorter fixed term mortgages. In some instances you can be hit with a charge of 13 per cent of the value of your loan – which on a £150,000 mortgage would mean paying £19,500 to get out of the deal."
"A rate of 6.5 per cent is not prohibitive and could prove to be a worthwhile long term strategy if you don’t mind accepting the risk that at some point you’re likely to be paying over the odds. Interest rates will eventually go down and that’s when people on fixed deals feel hard done by."
The MoneyExpert.com analysis shows that there are currently some 921 fixed mortgage products on the market from 74 different providers.
* Analysis by MoneyExpert.com from 30.07.07 and 16.07.08