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by administrator @, Monday, October 24, 2011, 09:49

Housing Minister, Grant Shapps has called on lenders to consider offering more long-term fixed mortgages.

By offering fixed mortgages of as much as 30 years he hopes to encourage greater stability in the housing market.

Speaking at the Building Societies Association's Annual Mortgage Seminar, Shapps said that he wanted to start a national debate on long term fixed mortgages and how their introduction into the British market could contribute to greater house price stability. He said they should become a "normal and sensible choice" for homeowners in the future.

He explained that there are currently no mortgages with guaranteed lifelong interest rates. Few mortgages available can be fixed for five or more years, with the deals that are available often being restricted to those borrowing less than three-quarters of their property's long-term value.

He said that longer-term products will ensure "people know where they stand", as they will give consumers greater certainty over the costs of buying a house in the long term and allow families on tight budgets to know exactly how much they will be paying for their home in the future.

He said: "In today's uncertain world, people want to know where they stand. Yet when it comes to buying a home, there are no mortgages available for them where they can fix their payments for a long time - the longest fixed-rate mortgage for many is five years.

"Longer term mortgages - possibly as long as 30 years - could help families on tight budgets know exactly where they stand when they're buying a home, by giving them greater certainty over how much they will be paying for their home in years to come.

Paul Broadhead, Head of Mortgage Policy for the BSA, said: "We welcome the prospect of an inclusive debate on any measures which will help lenders lend and consumers borrow. We also endorse the Government's aim for a stable and we presume active housing market. Longer-term fixed rate mortgages have been offered in the past but with limited consumer demand. Ten-year rates are currently available and lenders do respond with new products where demand exists.

"The challenge with fixed rate mortgages is always the balance between price and flexibility for the consumer. The more flexible a fixed rate is the more expensive it is for lenders to fund with the knock-on higher cost to consumers. We are keen to hear more about the Minister's ideas on new sources of long-term market funding.

"We would certainly not advocate a 'one-size fits all approach' to mortgages. It is right for lenders to offer a range of products which suit the different needs of individual consumers."

fixed term mortgages

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