Property experts rubbish Labour’s 25-year mortgage plan
Shadow Chancellor Rachel Reeves believes longer-term loans could help buyers, but they won't work here, property experts say.
Labour’s plan for 25-year mortgage deals has been rubbished by experts who say it won’t get off the ground.
Only 1% of mortgage deals agreed in the year to October 2023 were fixed for terms longer than five years, according to UK Finance.
But Shadow Chancellor Rachel Reeves (main picture) says that longer term deals are popular in other parts of the world.
She argues that homeowners would be less exposed to interest rate changes, and mortgage stress testing would be unnecessary.
Mortgage shopping
But the downside is that homeowners would not be able to shop around for the best deals.
Richard Donnell, Executive Director of Zoopla, says he doesn’t believe there is an appetite for longer term deals in the UK, The Daily Telegraph reports.
We have been talking about this for quite some time now and clearly the market isn’t there.”
He says: “We have been talking about this for quite some time now and clearly the market isn’t there to get the mortgage rates at the right level.
“Very few [lenders] do mortgage terms of over five years because those rates are always a little bit higher.”
A move to longer term deals would help first time buyers, he says, but it might also push prices up.
More expensive
Andrew Wishart, Senior Property Economist at Capital Economics, warns that longer fixed-rate mortgages caused problems in the US.
The vast majority of the time it’s going to be much more expensive to fix for 25 years than for two or five.”
He said: “The vast majority of the time it’s going to be much more expensive to fix for 25 years than for two or five.
“The obvious comparison is the US. In the UK, we historically have more variable rate mortgages and now we have shorter two or five-year fixes.
Dramatic fall
“In the US the big thing we have seen is that where everyone has a 30-year mortgage interest rates have gone up to 7%.”
The number of homes for sale fell dramatically because most mortgages could not be transferred to other properties, he says.
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