Michael Gove has thrown his weight behind long-term fixed-rate mortgages that run for up to 25 years.
The housing secretary says these longer terms, typical in the US and Canada, offer borrowers greater “certainty” over their home loan payments.
Gove tells the Daily Telegraph: “One of the things that I think is right for levelling up overall is making sure we can develop the types of products that are elsewhere in the world – particularly in countries like Canada – which are long-term, fixed-rate mortgages, so you don’t get the oscillation of how much you pay every two or five years, but you have certainty over as long as 25 years on what you pay. I think that is something we should look at.”
The minister adds that it is currently “more difficult [for borrowers] to have access to mortgage finance”.
His comments come as mortgage data from Moneyfacts yesterday revealed that the average two-year interest rate topped 6% for the first time since the wake of the then Chancellor Kwasi Kwarteng’s mini-Budget in September.
The average two-year fixed rate lifted to 6.01% yesterday from 5.98% on Friday, while the average five-year fixed rate rose to 5.67% from 5.62%.
Around 1.4 million of these deals are due to expire this year, which were often signed at a rate of around 1.5%, leaving customers facing a sharp jump in their bills when they move onto a new deal.
Also, yesterday Prime Minister Rishi Sunak refused to consider a mortgage protection fund to help households struggling to cope with rising mortgage payments.
Speaking on ITV’s Good Morning Britain, Sunak declined to back extra support for mortgage holders – specifically a £3bn mortgage protection fund which was proposed by the Lib Dems at the end of last week.
The Prime Minister said the government needed to “stick to the plan”, of cutting inflation, currently at 8.7%, by half by the end of the year.
