Norhafidz

Industry officials have suggested that consumers that are thinking of taking out a two or three year fixed rate mortgage could actually find themselves far better off over the longer term by opting for a five year fixed rate deal. Although many consumers in the UK do not seem to like the thought of a very long term fixed rate loans for fear that they will lose out if interest rates fall – despite Alistair Darling's push for this sort of mortgage to become more accessible – industry professionals state that a five year fixed term is not overly long, and could end up saving consumers up to £5,500.

Some cheaper two and three year fixed rate deals do offer lower interest rates than five year fixed rate mortgages, but they also charge significantly higher arrangement fees, and this is where the consumer could end up losing out. The arrangement fees on these shorter term fixed rate deals can be around £1500 but on the five year fixed term mortgage the arrangement fee is often around £1000 or less. It would therefore cost the borrower £7500 to remortgage over a ten year period on a two year fixed rate mortgage, but would only cost £2000 or under for a five year fixed rate mortgage.

Although Alistair Darling has been pushing for consumers to look at longer term mortgages for 20 or 25 years, many lenders have stated that consumers are not keen to tie themselves into a particular rate for such a long period, and industry officials have added that those wishing to get out of the long term fixed rate deal mid-term could find that the costs are crippling.