Economic recovery could be hampered by long term mortgages


Economic recovery in the UK may be hampered if too many people opt for long-term mortgages, it has been suggested.
Ray Boulger, senior technical manager at John Charcol, noted the government will find it increasingly difficult to manage the economic crisis if rising numbers choose home loan options that last for 15 years or more.
The industry figure pointed to the example of the housing market in the US to illustrate his point.
He observed most people in America have a 15 or 30-year fixed-rate mortgage – resulting in their property field performing terribly when compared with that seen in the UK.
“A third of borrowers in the States are in negative equity. There are huge regional variations – much more than in the UK – but in some areas there have been really huge falls,” Mr Boulger pointed out.
Individuals may therefore be wiser to select shorter-term mortgage deals in an effort to stabilise the home loan market and facilitate quicker economic growth.
Mr Boulger’s comments come after recent findings from the Building Societies Association revealed the value of mortgage approvals and gross lending in September this year were at their greatest since January 2010.

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