James Moore: Forget today's best deals and fix your mortgage for longer
James Moore is the Independent's Associate Business Editor and writes the Outlook City comment column from Tuesday to Friday. He also has a keen interest in disability issues and when not attempting to further injure himself playing wheelchair basketball.
Tuesday 01 July 2014
Outlook Moneyfacts, the financial data company, says it's time to celebrate 25 years of the fixed rate mortgage.
Back then there were just seven of them, with the best offering three years at 12.4 per cent. That looks frightening until you consider that base rates were at 14 per cent, RPI inflation stood at 8.3 per cent and the average price of a house was £50,000.
Things are a little different now. There are 2,181 such deals, outnumbering variable rate products by nearly three to one. With interest rates set to rise, and perhaps quicker then even outlying forecasts would have you believe, Moneyfacts characterises them as the industry's potential "white knight". That could prove to be an accurate description.
The problem, as it points out, is the question of when to fix and for how long. Given the impossibility of predicting the market, it's a question that shouldn't even be asked.
Better to base decisions on what people can afford and what's out there when they're buying.
The Bank of England has the jitters about the number of borrowers who have extended themselves to the degree that even a small rise in rates could tip them over, and no wonder. If more of them were on fixed rates, it wouldn't need to worry so much.
Borrowers should arguably be encouraged to fix for longer, even if it does mean them occasionally seething while loud-mouthed friends brag about their deals.
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