The UK’s eighth largest building society is one of only two lenders that have responded to the challenge laid down by chancellor Gordon Brown earlier this year by launching a mortgage fixed for up to 25 years. The Society’s comments coincide with the publication of the interim findings of an investigation by Professor David Miles of Imperial College London, who has concluded that the way lenders compete for new business is one of the main reasons for the proliferation of shorter-term products, at the expense of long-term fixed rates.
Commenting on the market for longer term fixed rates Tony Burdin, Head of Marketing & PR, said: "I am both surprised and disappointed that the major lenders have so far spurned long-term fixed rate mortgages. Leeds & Holbeck has proved that such products can be offered at competitive rates and with flexible terms. However, the reluctance of the other lenders to enter the market means that the supply of products is insufficient to generate widespread awareness, which would in turn stimulate demand from borrowers. I have also been disappointed by the response of some mortgage brokers, who seem rather reluctant to recommend the potential benefits of long-term fixed rates to their clients, even though Professor Miles says that borrowers have a poor understanding of risk.
"It must be noted however, that long term fixed rates might not be for everyone and that a low introductory rate over the first few years of the loan may be right for some people. When Leeds & Holbeck launched its first 25-year mortgage in May at 5.39%, many commentators thought the rate was too high. Now, with many standard variable rates (SVRs) at around 5.75%, this rate looks great value and is lower than most current 5-year deals. The Society's current offering at 5.99% is only 0.25% higher than most SVRs and with interest rates expected to rise, again looks good value.
"Lenders have a significant opportunity to re-educate consumers and, whilst shorter term products will remain popular with many people, the availability of long-term fixed rates could be addressed. Similarly, mortgage brokers and financial advisers could do more to explain the risks of the ‘jam today’ deals compared with the valuable protection and security of knowing exactly what your mortgage payments will be, irrespective of what happens to interest rates or the economy."
Leeds & Holbeck’s long-term fixed rate mortgage is priced at 5.99% and can be fixed for 15, 20 or 25 years. Customers are able to repay up to 5% of the outstanding mortgage each year without penalty and can redeem the entire mortgage, or switch to another deal, after 5 years and then every 2 years thereafter. Details can by obtained by visiting www.leeds-holbeck.co.uk or by calling 08450 50 50 62.