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A 25-year fixed-rate mortgage
By Hannah Ricci
Britain's biggest building society, Nationwide, has shaken up the mortgage market with the launch of a 25-year fixed-rate deal.
Although some smaller lenders already offer 25-year fixed deals, Nationwide is the first big provider to do so, with a fixed rate of between 5.49% and 5.89% until 2032, depending on the size of the deposit and whether it is a new loan or remortgage.
Although mortgage repayments have spiralled for many people after three interest rate hikes since last summer, opinion is mixed over the offer.
Expensive deal
"It is ludicrous to allow yourself to be tied into a contract for this length of time - even though the product boasts no early redemption fees after 10 years," says Louise Cumings, head of mortgages at moneysupermarket.
If you had taken out a fixed-rate mortgage in 1997, for example - when interest rates reached 7.25% - you would have been locked into an expensive deal and not seen your repayments fall in line with the subsequent interest rate cuts, which fell as low as 3.5% in 2003.
However, Ray Boulger, senior technical director at broker John Charcol, says the product could be suitable for some borrowers. "Long-term fixed rates are ideally suited to borrowers who intend to live in their property for the long-term and prefer the security of a constant monthly mortgage payment to help with budgeting."
Yet Cumings says better deals are available. "If a longer term fixed-rate is required with a 'get out' clause after 10 years, better options are available through providers such as the Derbyshire Building Society, Yorkshire Building Society or Skipton Building Society."
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