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Fixed rate mortgages have become increasingly popular in recent years, particularly when UK interest rates are rising. This type of mortgage enables people to work out an accurate monthly budget and usually lasts for 2 to 5 years. However, longer term fixed rate arrangements are also possible.
A few 25 year fixed rate deals are available from smaller lenders, but the Nationwide Building Society has now decided to enter the market. Their fixed rate offer, over 25 years, is 5.49%. This is a little higher than the current average of 5.27% for all fixed rate products. The Nationwide has allocated £50m to fund this deal which will only be available for a limited period. The current average mortgage value is £123,000 so it has been suggested that only around 400 homebuyers will be able to take up the offer. The Nationwide has said that early redemption fees will not apply after 10 years, so there is some flexibility in the arrangement.
In the past such lengthy fixed rate mortgages have not been popular. On the whole people do not want to be tied to any arrangement for such a long time, as they cannot predict their circumstances that far ahead. Also the interest rates have usually been significantly higher than shorter term offers so there was no immediate advantage to the borrower.
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