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Long Term Fixed Rate Mortgages

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Slightly away from the excitement around NR, but building on comments from Greenspan. Alistair Darling (on Radio 5 this morning) re-iterated that he thinks the UK should have more longer term fixed rate mortgages. Households are then not exposed to the fluctuations in IR, apparently the majority of mortgages in the UK are variable (of some sort).

This raised 2 questions in my mind:

1. Would I switch to a 25 yr fix? Personally I like the feeling of freedom to move mortgages and lock in to deals if IRs fall, wouldn’t a 25 yr fix preclude me from that without massive penalty charges? And wouldn’t these rates be higher than the short term fixes?

2. If everyone was on L/T fixed rate mortgages doesn’t this remove an important inflation curbing instrument from the BoE / government? An increase in IRs would not impact the vast majority of home owners, only those looking to re-mortgage or buy. Would that mean a return to managing inflation only through fiscal policy?

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