moneysupermarket.com: Housing Green Paper

Commenting on the Housing Green Paper, Louise Cuming, head of mortgages at price comparison website moneysupermarket.com, said: “The government's proposed legislative framework to promote 25-year fixed-rate mortgages is an interesting and well intentioned move, but one that I feel will fail.

“The government can try to push longer-term fixes but consumers won’t bite. These products are already here but they’re not flying off the shelves.

“25-year fixed deals may offer some protection against rising interest rates and can seem an attractive alternative to hunting for a new mortgage every two to three years. They may also seem an appealing way to avoid ever-increasing fees associated with taking out short-term fixes. However, it is important to understand the risks of locking into a financial product for such a long time.

“None of us have been blessed with a crystal ball and we cannot predict what our situation will be in even 10 or 20 years from now. People’s financial circumstances change and if you wanted to leave your 25-year mortgage early you are likely to face hefty Early Repayment Charges. For example, on a 25-year repayment mortgage of £150,000, trying to exit Cheshire Building Society’s 25-year product in the first four years will cost £7,540, and after 16 years £1,500. It is only after 20 years that you escape the ERC trap. The Cheshire does offer small penalty-free windows after six, eight, ten, 12 and 14 years, but life doesn’t always fit in nice pre-ordained windows.

“Of the 13,666 mortgage products on the market, only seven are fixed for 25 years – thus highlighting the lack of consumer appetite for them. Where there is no demand, there is no choice.”