Tuesday, September 02, 2003

Now Brussels wants homeowners to pay tribute

Mortgages will cost £1000 more under the Euro. Another advantage it seems.

3. Joining the euro would mean more expensive mortgages

As part of his plan to force the British economy into convergence with the Eurozone, the Chancellor is looking at ways of moving people onto fixed rate mortgages to become more like the Eurozone. However, according to research by the mortgage broker The MarketPlace, such fixed rate mortgages would be at least 1.75 percentage points more expensive than the cheapest loans available. David Bitner of The MarketPlace, said that the move to higher interest rates could cost borrowers £12 billion a year – around £1,000 each.

Bitner said, “The Chancellor is willing to remove the competitive, flexible, choice-driven mortgage market borrowers have become accustomed to and replace it with a system that offers borrowers very little. The knock-on effects of moving to a fixed system could be huge – inflation, property prices and consumer confidence are likely to be dramatically affected” (Sunday Express, 15 June).

Ray Boulger, senior technical manager of broker Charcol said, “On odd occasions, 25-year fixed-rate mortgages have sold well, but only when they have offered very competitive rates. They will never sell in huge quantities.” David Hollingworth of broker London and Country, said, “The cost of a 25-year fix is what puts people off. People who have fixed over the longer term in the past have often got caught out, stuck on a higher rate. This has cost them a lot of money to get out of. Home owners tend to be prepared to look ahead five years at a time, and you can get very competitive deals at less than 4 percent over this period, which adds to the attraction” (Independent on Sunday, 15 June).


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