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Fixed-rate mortgages of up to 25 years could help homeowners struggling amid Britain’s borrowing crisis, Michael Gove has said.<\/p>\n
The Levelling Up Secretary has indicated that longer-term deals, similar to the type more commonly found across the pond, would help insulate homeowners against volatility in the mortgage market.\u00a0 His comments came as the average interest rate on a two-year fixed-rate mortgage climbed to 6 per cent for the first time since December. Rates have been on the rise this month as concern grows among lenders that the Bank of England’s efforts to curb inflation are failing.<\/p>\n
Experts are predicting further rate rises in the coming weeks and months as lenders pull products from the market and replace them with new, more expensive deals.\u00a0 TSB announced it was withdrawing a number of its mortgage products on Monday, joining the likes of Santander, HSBC and Nationwide who have pulled deals and increased rates in recent days.<\/p>\n
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Millions of homeowners across the UK, where most mortgages are fixed for two or five years, are facing sharp rises in the cost of borrowing with 1.4 million fixed-rate deals due to run out this year alone.<\/p>\n
Mr Gove told The Telegraph it is becoming \u201cmore difficult to have access to mortgage finance\u201d and suggested that fixed-rate mortgages for longer periods could protect households from wild swings in their bills.<\/p>\n
He said: \u201cOne of the things that I think is right for levelling up overall is making sure we can develop the types of products that are elsewhere in the world \u2013 particularly in countries like Canada \u2013 which are long term, fixed rate mortgages, so you don\u2019t get the oscillation of how much you pay every two or five years, but you have certainty over as long as 25 years on what you pay. I think that is something we should look at.\u201d<\/p>\n
But while longer-term fixed-rate deals may help borrowers weather interest rate rises, they could also make it harder to curb inflation.<\/p>\n
Don’t miss… <\/strong> We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info<\/p>\n Data provider Moneyfacts said the average two-year fixed-rate mortgage had increased to 6 per cent \u2013 raising a typical customer’s outgoings by approximately \u00a31,000 a year.\u00a0 Although some British lenders provide fixed-rate mortgages of 10 years or more, the rates are typically set higher and the products are not commonly used.<\/p>\n Data from MoneySavingExpert shows that the best available interest rate for a typical \u00a3200,000 two-year fixed-rate mortgage is 5.05 per cent from Barclays. Specialist lender Kensington offers a 25-year fix at 5.6 per cent for the same loan.<\/p>\n A customer who took out a 25-year fixed-rate mortgage now would have greater certainty over their payments, but would also risk missing out on potentially much lower rates in the future. Though Mr Gove mentioned Canada in his comments, long-term fixed deals are more common in the US.<\/p>\n Canada’s government says most homeowners in the country have fixed-rate deals for up to five years.\u00a0 Host homeowners in the US have 30-year rates owing to a long tradition of federal support through lenders Fannie Mae and Freddie Mac.<\/p>\n
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