Nationwide made the statement after confirming its ten-year fixed rate product attracted twice as many applicants as originally expected. The deal, launched in April, currently offers a ten-year fixed rate of 4.89 per cent and protects borrowers against future rate fluctuations.
However, brokers are dubious and believe that the current interest rate situation means the majority of borrowers prefer short-term, flexible mortgage products.
Brian Murphy, head of lending at Mortgage Advice Bureau (MAB), said in his experience borrowers preferred more flexible deals. “We’re still finding that most customers, even first-time buyers whose need to budget is more acute, are attracted to shorter-term deals.
“Many believe the Base Rate has peaked and expect only a downward movement so on this basis discount tracker deals are, in my experience, the most popular.”
Rod Murdison, proprietor of Murdison & Browning, agreed. “There’s a strong argument for long-term fixed rates from a budgeting point-of-view but the negative side is that because it’s such a long-term deal, the element of risk to the lender is higher so the rate is higher than short-term deals.
“They’re not that popular because the rate is just not low enough for people to stick with them. The risk of entering a long-term fixed deal is, what happens if rates were to fall substantially?”
Steve Clode, marketing director at Nationwide, said: “People who take out fixed rates like the certainty of knowing how much they will be paying each month and increasingly people are realising that they don’t want to keep remortgaging every couple of months.”
