Unintended consequences
This would allow more first time buyers on to the property ladder, but potentially with a knock on effect.
Mr Donnell said: “It will probably boost house prices if first time buyers were able to buy with fixed rates.
“If you’re a first time buyer and you’re looking to buy the home you rent, even at 4.5pc [fixed-rate], it would be cheaper to buy than to rent than most of the cheaper regions in the UK. In the south of the UK it gets more expensive.”
Andrew Wishart, senior property economist at Capital Economics, said longer fixed-rate mortgages had caused problems in the US market amid high central interest rates.
He said: “The vast majority of the time it’s going to be much more expensive to fix for 25 years than for two or five.
“The obvious comparison is the US. In the UK, we historically have more variable rate mortgages and now we have shorter two or five year fixes.
“In the US the big thing we have seen is that where everyone has a 30 year mortgage interest rates have gone up to 7pc.”
He added that the number of homes listed for sale had “dropped to the floor” because most longer mortgages cannot be transferred to other properties.
First Direct currently is offering 10-year fixed rate deals for as low as 3.99pc at 60pc loan-to-value, while Prenna and Kensington have deals that have fixed interest for the life of the mortgage.
Perenna’s 25-year fixed offer is at 5.75pc at 90pc loan-to-value, while Kensington’s is 5.6pc for 60pc loan-to-value.
The Government has previously signalled its interest in longer mortgage terms. Michael Gove proposed rolling out longer fixed terms in the summer when ministers were also reportedly eyeing Dutch-style 40-year terms.
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