Nationwide’s 25-year mortgage
July 19, 2007
Nationwide has responded to calls from the Prime Minister and the Chancellor for longer term fixed rates. The building society is to relaunch its 25-year deal which it originally offered with limited funds earlier in the year, and which proved popular at the time.
The rate for the new fixed deal will be 6.39% for homebuyers and 6.49% for those remortgaging, and there is a fee of £599. The loan can be ported if homeowners need to move, but any extra borrowing requirement will be loaned at Nationwide’s rate at the time.
Should homeowners wish to redeem the loan early, then within the first ten years there will be a fee of 3%. After that time they can leave without penalty.
The Government is looking for more ways in which it can help mortgage lenders provide more affordable longer fixed rate deals, such as changes to the bond market to make longer term deals easier to set up.
Nationwide certainly believe that 25-year deals have a place in the market, offering long-term stability to borrowers who wish to protected from interest rate fluctuations. Other mortgage experts wonder how successful long-term fixed rates will be when tying people in for ten years – most people like to commit to a single property for only five years.
There have also been calls for lenders to allow customers to be able to borrow more money at decent rates or to reduce exit fees for early repayments.
Anyone looking for a 25-year loan has to consider that whereas a lender may be willing to offer them a loan on a property now, a different property in the future will still be subject to loan-to-value and multiple income restrictions.
Some people are sceptical about such long-term rates. They may seem attractive now as interest rates are on the rise, but when interest rates start to come down again, borrowers might not feel so happy then.
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