Abbey has warned that the chancellor Alistair Darling needs to be realistic about consumer appetite for 25-year long-term fixed rate deals.
Darling called on lenders in his Budget today to develop long term flexible mortgages. Four years ago Gordon Brown commissioned economist Professor David Miles to conduct a study into long-term fixed rates.
But the main problem any lender offering a long-term fixed rate has found is that consumers find them unattractive and take-up has always been low.
Nici Audhlam-Gardiner, director of mortgages at Abbey, says: “While it may be true that the market could benefit from a slightly longer-term outlook than its current two-year cycles, our customer insight tells us that 25 years is too long for most people to fix into a mortgage.
“We’re finding at Abbey that people’s horizons are lengthening – with five year fixes becoming increasingly popular – but 25 years is still very niche.
“So much can happen in a quarter of a century, both to a customer’s circumstances and to the economy. So while these very long term deals may be suitable to provide long-term stability for a small number of customers – they will not be suitable for all.”