A study by the price comparison website finds that 32% of borrowers who are coming to the end of their fixed-term loans in the next three years are looking to move onto much longer offers.
Traditionally, two-year fixed-rate home loans have been the norm. But “there is a clear change in attitudes towards long-term fixes, as just 11% of homeowners will currently only consider a short-term fix when they next remortgage”, says the report.
It adds that 45% of borrowers are keeping their options open and will consider both long and short-term deals.
The study says that 19% of homeowners are also considering remortgaging before the end of their current fixed term, “which hints that some are prepared to pay an early repayment charge in order to lock into a new fixed rate deal as rates may still rise further later this year and early next.”
Last week, the Bank of England raised the base rate by 50 basis points to 2.25%, the highest rate for 14 years and the seventh hike since December.
The move aims to help counter rising inflation, driven by food and energy costs, which the Bank now forecasts will peak at just under 11% in October, down from a previous forecast of 13%.
The Office for National Statistics’ latest data shows that inflation dipped from 10.1% in July to 9.9% in August.
However, many economists have updated their forecasts and now say interest rates could now more than double by next spring to 5.8%, following Chancellor Kwasi Kwarteng’s move to cut income tax, national insurance and stamp duty in last Friday’s mini-Budget.
The price comparison website’s poll says that of borrowers looking to remortgage to a long-term fix, 86% would choose a loan between five and ten years.
But the report points out that long-term fixes “are already commonplace”, with 42% of homeowners already signed up to a fixed-rate loan with between four and 30 years remaining on the deal.
It says: “There is a general lack of understanding among homeowners around long-term fixed-rate mortgages. Today, there are several long-term fixed-rate mortgages available on the market – ranging from five to 50 years.”
The study adds that few homeowners are aware that the longest fixed-term mortgage rate available is above 40 years.
It finds that 67% of homeowners believe the longest fixed-term rate on the market is between two and ten years, while only 6% are aware that long-term fixes range between 26 to 40 years.
When homeowners were asked what they considered a long-term fixed mortgage, 66% believed this to be between five to 10 years.
Long-term fixes potentially increase the amount households can borrow, yet 31% of homeowners have reservations, the poll finds.
The study says the main reasons for caution are personal circumstances changing and the mortgage becoming inappropriate, cited by 56% of homeowners.
Interest rates being higher than short-term fixes was a worry among 45%, and high fees if borrowers decide to change product, or move home without taking their existing mortgage with them when they move house, concerned 41% of homeowners.
Comparethemarket director Alex Hasty director says: “The upward trend in the popularity of long-term fixed-rate mortgages looks set to continue, as the cost-of-living crisis grows, and the Bank of England recently raised rates even further.
“There are many considerations when weighing up what is the right mortgage product for you. Long-term fixed-rate mortgages offer certainty of repayments for a much longer period than short-term fixes and protect against any further interest rate rises. However, this tends to mean the interest you pay on these products is higher.”
Comparethemarket’s poll was conducted by data group Censuswide among 2,023 mortgage holders between 5 and 10 August.
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