A fixed rate fix
Adam Creighton 4:09pmDarling banged on about how the government would encourage or facilitate the growth of a long-term, fixed-rate mortgage market for home buyers, especially first time buyers. Reviews and committees are apparently to be set up to examine this product in more depth.
London is, probably, the world centre of new financial product development and it seems odd that such products would not have been developed and marketed already if they were economically feasible. The likely reason they have not is that fixed rate mortgages are more expensive than variable rate mortgages: someone has to bear the risk of underlying interest rates moving around, either the bank or the borrower. A bank is not going to bear this risk for free, unless the government forces it to, which, given Labour’s proclivity for involvement with private banks is perhaps on the cards
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Comments
bludnok
March 12th, 2008 4:42pmTo find long-term fixed-rate loans at a cost of 2 to 3% one probably has to go back to before 1914. It is the likely value of the money when returned at the end of the loan which, along with creditworthiness, will determine the interest demanded. Who in their right mind would lend out money at a fixed rate in view of the history of the pound in the last 50 years? Even since 1970 the pound has lost more than 90% of its value and, judging by the gold price, there is a lot more to come.
Bruce Robertson
March 12th, 2008 5:03pm"The world centre of new financial product development"... Yes these wonderful financial "engineers" have "engineered" in positive and negative feedback loops which has led to the current crisis! Never mind, let's just party on like it's 1929!
Frank Leader
March 13th, 2008 9:39amFixed rate mortgages should be 3% above the true rate of inflation.