House Doctor: 'Why can't we find a good deal on a 25-year fixed mortgage?'

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The Independent Online

Question: My wife and I want to take out a 25-year fixed term mortgage on our new home but are struggling to find anyone who provides them. I know 25 years is a long time but we've done all our financial planning and by fixing for so long, reckon it's our best option.

Ray Greene, Oxon

Answer: You may want one but British lenders have other ideas; the mightiest of fixed-term mortgages has been mothballed. Demand is so low that home loan providers have quietly cleared all such mortgages from their shelves.

Unloved and ignored, the quarter-century fix finally disappeared from view last year when the Kent Reliance building society – the last outpost of 25-year fixes – ditched its 5.98 per cent offer.

Although prevalent in the US and Europe, where traditionally more stable housing markets supported such lengthy lock-ins, these fixes have proved unpopular in the UK.

Here, a culturally more competitive mortgage market has developed over the past 10 to 15 years, with the focus on cut-price short-term two- or three-year deals that revolve around the Bank of England base rate.

"When actually faced with a 25-year rate or a cheaper shorter-term fix, people have tended to vote with their pockets," says Andrew Montlake at broker Coreco.

Inflexibility also put borrowers off, adds Melanie Bien at broker Private Finance. "With 25-year fixes there tend to be penalties if you switch to another deal during the first 10 years of the mortgage," she says.

The longest deal open to you today is a 10-year fix, says David Hollingworth at broker London & Country – on offer from lenders including Yorkshire building society, Accord and the Principality building society.

"With Accord, you can get a decade-long fix at 4.84 per cent as long as you've got a loan-to-value ratio of at least 75 per cent," he says. There's also a £1,995 fee.

However, he warns, there are downsides if you pick such a long fix, despite your comfort in its security.

"Say you want to move within a few years and can't agree to switch your mortgage to a new property with your lender, you could be stung with hefty financial penalties to refinance the loan," he says.

This would typically be a five per cent fee during the first five years of a 10-year fix.

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