As consumer sentiment in the UK continues to decline, the mortgage market there is moving towards long-term, fixed-rate deals. Research quoted by Banking and Insurance Business Review indicates the proportion of fixed-rate mortgages on the UK market with terms over 10 years has almost doubled in the last 12 months. And as the current liquidity crisis continues, the number of available mortgages has plummeted by 41% overall, but long-term offerings have seen an increase from 127 available products to 137. According to MoneyExpert.com, the average initial rate payable on 25-year fixed-rate mortgages, at 6.56%, is notably lower than the market average of 6.9%, but still higher than last year's average of 6.38% for a comparable deal. MoneyExpert's director attributed the findings to "a flight to safety" by customers as a result of the credit crunch, and noted that both borrowers and lenders are currently keen on deals that offer certainty.
The Federal Government is conducting a review via a senate committee into the competitiveness of the home lending market here in Australia. One of the proposals put forward by the Melbourne Business School, and supported by the likes of David Liddy from Bank of Queensland and John Symmons from Aussie Mortgage Market, is for the establishment in Australia of an agency similar to Freddy Mac and Fannie Mae in the US, although the model they are proposing is more like that which operates in Canada which continues function normally despite current conditions. If adopted in Australia, one thing a funding model like this might be able to provide is longer term, fixed rate mortgages.
If they became available would you consider using fixed rate mortgages for terms of 20 or 30 years?
(references: Banking and Insurance Business Review, 31 July 2008)