Fixed mortgage rate for 25 years

27 March 2007

The Nationwide building society is launching a 25-year fixed rate mortgage.  Fixed rate deals have become more popular in the past few months, since the Bank of England started raising interest rates.  But deals lasting as long as a quarter-of-a-century are unusual; most typically last from two to five years.

Nationwide says its mortgage will be flexible and an early redemption fee would not be charged after 10 years.  The deal will only be available for a short time though, and as it’s being funded by just £50 million, only an estimated 400 borrowers will be able to take advantage of it.  This mortgage comes with a slightly higher interest rate than the current average rate for fixed mortgage deals; 5.49% as opposed to 5.27%.

Mortgages lasting 25 years have been offered before, both by smaller lenders and HSBC.  However they proved to be unpopular.  Explaining the lack of demand for its 25-year fixed rate mortgage back in 2004, HSBC said:  “Borrowers can just about visualise what they will be doing in five years.  Over 10 years or longer they find it more difficult and don’t want to be locked into something with redemption penalties in case their circumstances change.”