Thu 26th Jul, 2007
25-Year Mortgages
Chancellor Alistair Darling announced recently that the Treasury would reorganise the mortgage market as part of its wider efforts to make housing more affordable. The government wish to make changes to the mortgage industry by making it easier for homeowners to obtain longer-term mortgages. The chancellor wishes to increase the supply of long-term fixed rate home loans by allowing more people to take out 25-year term mortgages, which will offer better value for money.
There have been recent concerns as many lenders are encouraging borrowers to take out short-term mortgages, which is causing homeowners to become stretched and end up struggling to meet their monthly loan repayments. Mr. Darling stated that there has been a big expansion in fixed rate mortgages over the last few years, however they have all been short term, for a period of two or three years and he would like to see them extended for longer-term fixed rates.
The Treasury would also like to stabilise house prices and make mortgages more affordable. However, in order to obtain this goal there will have to be more houses built to meet the demand of the current market. Currently the government has committed to build 200,000 homes a year over the past ten years. Economists believe that the shortage of available properties and the high demands have caused the house prices to inflate to unaffordable levels and the chancellor would like to even out the demand and reduce the costs of property, allowing more first-time buyers to get a foothold onto the property ladder.