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Long term fixed rate mortgages - 25 year fixed rate mortgages

The need for long-term security and stability has become more apparent dude to the 2008 credit crunch and, with government backing, mortgage lenders are being asked to create long-term fixed rate mortgages. These loans, with fixed-rate terms of 20 years, 25 years or more, are likely to become more common in the mortgage market.

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What is a long-term fixed-rate mortgage?

A long-term fixed-rate mortgage is like a standard fixed-rate mortgage, except the fixed-term is spread over a longer period. 25-year fixed-rate mortgages therefore have their repayments set at a certain level over a 25-year period. Other long-term mortgages include 20-year fixed-rate mortgages and 10-year fixed-rate mortgages.

How long do long-term fixed-rate mortgages last for?

Currently, the government is calling for the introduction and wider take-up of 25-year fixed-rate mortgages. However, any fixed-rate mortgage term over five years is considered long in today’s market. Fixed-rate mortgages generally have a maximum of 25 years, which is usually the lifetime of the mortgage.

What are the advantages of long-term fixed-rate mortgages?

Just as short-term fixed-rate mortgages shield the borrower from short term fluctuations in the property and mortgage market, so long-term fixed-rate mortgages ensure a fixed level of repayments, avoiding repayment shock and the need to remortgage.

What could the disadvantages of long-term fixed-rate mortgages be?

The disadvantages of being tied into a long-term fixed-rate mortgage could be the inability to take advantage of lower interest rates, should they come down. Interest rates do rise and fall, and 25 years is a sustained period in which to pay the same rate.

Some long-term fixed-rate mortgages allow the borrower to remortgage after paying an early repayment fee. So, 25-year fixed-rate mortgages protect the borrow from rising interest rates and adverse market conditions, not to mention repayment shock when remortgaging, but they can also tie the borrower into temporarily paying a non-competitive rate.

Why are long-term fixed-rate mortgages easier?

Long-term fixed-rate mortgages are easier for two primary reasons. Firstly, the monthly mortgage repayment remains the same throughout the entire repayment period.

This means that the borrower can budget for their repayment and will not be shocked by adjustments to their rate. The second reason why long-term fixed-rate mortgages are easier is because they eliminate the need to remortgage ever two or three years to find the best deal.

Do many mortgage lenders offer long-term fixed-rate mortgages?

More and more mortgage lenders in the UK are offering 10-25-year fixed-rate mortgage loans.