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25 Year Fixed Rate Mortgages

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http://www.gmacrfc-partners.co.uk/render.a...vIDs=1,8,46,179

Darling to encourage long-term fixed-rate mortgages

New rules are set to be introduced this week which will allow borrowers to take out mortgages with rates fixed for 25 years.

Chancellor of the exchequer Alistair Darling is set to announce the changes when he delivers his first Budget on Wednesday (March 12th).

The idea is to bring stability to the housing market by offering the long-term deals and it is hoped that they will bring an end to the days of boom and bust.

Lenders will be given more freedom when it comes to raising funding through covered bonds.

The UK mortgage market currently has just a few deals which offer fixed rates for more than five years and the changes could have a dramatic impact on mortgage lending in this country.

Mortgage lenders will also be able to offer cheaper interest rates for reliable customers compared to less reliable borrowers.

It follows reports that Mr Darling plans to introduce a kite marking system for mortgages in a bid to encourage investors back into the wholesale mortgage markets.

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How are they going to do this? Surely the lenders will do what they want to do. And if such a deal were offered the rate would be quite high.

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I couldn't believe it. Darling actually said in his speech:

I also want more people to have the choice of a long-term fixed mortgage. These protect borrowers from risks and allow them the flexibility to move and to get a new mortgage if rates go down. Today, however, most people in the UK have short-term fixed-rate mortgages for two or three years, leaving them exposed to interest rate rises when their mortgage deal ends.

Why on earth would the banks offer a long-term fixed rate mortgage where the rate can only be moved downwards if rates go down? What happens if rates go back up again? If this works the way Darling says then everyone will end up on the lowest possible rate - fixed for the length of the mortgage. He's clueless.

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I couldn't believe it. Darling actually said in his speech:

Why on earth would the banks offer a long-term fixed rate mortgage where the rate can only be moved downwards if rates go down? What happens if rates go back up again? If this works the way Darling says then everyone will end up on the lowest possible rate - fixed for the length of the mortgage. He's clueless.

Economically not viable for the banks, they will not like this 1 bit, 100% correct guaranteed. I think this is all talk from Darling too

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Economically not viable for the banks, they will not like this 1 bit, 100% correct guaranteed. I think this is all talk from Darling too

you don't get to just move it down for free

you actually end up having to re-finance if you want the lower rate

as someone else has mentioned, the 30 year mortgage is standard in America, and has been for ever.

in fact, the 15 year mortgages are considered paying off early.

it's not a big deal all around, and certainly isn't for the banks, they will be perfectly comfortable in that lending environment.

Edited by Mr Nice

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Re:

I couldn't believe it. Darling actually said in his speech:

Why on earth would the banks offer a long-term fixed rate mortgage where the rate can only be moved downwards if rates go down? What happens if rates go back up again? If this works the way Darling says then everyone will end up on the lowest possible rate - fixed for the length of the mortgage. He's clueless.

Economically not viable for the banks, they will not like this 1 bit, 100% correct guaranteed. I think this is all talk from Darling too

and

you don't get to just move it down for free

you actually end up having to re-finance if you want the lower rate

as someone else has mentioned, the 30 year mortgage is standard in America, and has been for ever.

in fact, the 15 year mortgages are considered paying off early.

it's not a big deal all around, and certainly isn't for the banks, they will be perfectly comfortable in that lending environment.

agreed.

The banks can simply purchase long term money, add a margin and sell it on..

In any case it seems like he is suggesting multiple Caps - http://en.wikipedia.org/wiki/Interest_rate_cap.

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The banks can simply purchase long term money, add a margin and sell it on..

In any case it seems like he is suggesting multiple Caps - http://en.wikipedia.org/wiki/Interest_rate_cap.

If you force underprice risk then the banks wont lend.

re the link: I guess derivatives might save the day in the same way that "knowingly stitching that over-priced risk on some other mug" would.

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This has been brewing for a while, Darling mentions keeping inflation below the 2% target but how can the BOE achieve this without having to raise IR.

If they raise rates now and those coming out of fixed rate deals end up paying 2-3% more then people will feel the government failed them having risen IR when people needed them lower more than any other time in the last 10 years, if they keep rates low but banks do not pass the rate on then that is not the government or the BOE problem, they have done their bit.

So how do they raise IR without distressing homeowners and the wider economy, simple they offer security in the form of long term fixed deals, then they can tinker with IR as much as they like to control inflation.

I am sure a deal can be struck, the bank then has you for the next 25 years with no threat of you switching provider, 25 years of interest with little risk to the banks as this will be government backed or something along those lines, I am sure they will think of something so that the banks buy in, reduced taxes for those banks participating etc.

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  • 295 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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