Are 30 yr fixed rate mortgage deals likely?

When he made his call for lenders to start offering a 30 yr fixed rate mortgage deal last October, housing minister Grant Shapps was severely abused, but are very long term fixed mortgage rates such a bad idea?

In the USA and some European countries such long term fixed rate loans are common but, in the UK they are non-existent. When Grant Shapps called for a change he was pilloried in the press with headlines such as 'astonishingly bad advice'. He felt such long term fixed loans would offer borrowers a level of certainty which would aid budgeting.

With today's economic climate and borrowers changing circumstances including uncertain employment conditions and changing family dynamics including divorce, a degree of flexibility is required. For the vast majority, a long term 30 yr fixed rate mortgage deal is just too inflexible. The challenge for lenders would be to produce a cost effective long term rate with built in flexibility.

Over the last decade long term fixes have been talked about. Some lenders as far back as 2004 tried to introduce a product, but there was just not enough customer interest and demand to sustain offering such deals. In 2012 borrowers are even more wary about being tied to such long term deals. Many home-owners who were previously on fixed rate deals, found themselves paying much more than they needed to when the interest rates dropped. Borrowers are unwilling to put themselves in this position and to let it happen again.

Most brokers advise against a 30 yr fixed rate mortgage option, as who knows what will happen in 1 year never mind 30 and lenders are just not interest in offering such a long term product.