Dear oh dear! The government may be riding high in the polls at the moment, but when it comes to the mortgage industry, their meddling makes Scooby Doo and the gang of the Mystery Machine look like Benedictine monks.
Unfortunately, their meddling is nowhere near as successful as that undertaken by the legendary ‘pesky kids’ of TV cartoon fame.
Take the 25-year mortgage initiative. It was mooted as the panacea for those people that will struggle to cope with interest rate fluctuations and those seeking to avoid hefty arrangement fees when remortgaging.
Unfortunately it has been embraced by consumers with the enthusiasm that greeted the unveiling of the Sinclair C5. These products may well depart the shelves with just as much speed as Sir Clive Sinclair’s ill-fated invention.
According to a survey of 1000 people by Abbey, 54% would definitely not consider taking out a 25-year mortgage. A further 23% were unsure if a long-term fixed rate would be right for them and only 23% said they would consider a 25-year deal.
Abbey claims that, of those who would not take a 25-year fixed rate, 27% would not wish to be locked into a mortgage for such a long time.
Another 27% of respondents say that uncertainty of the future would discourage them and 18% of consumers thought that interest rates will fall and they will miss out on better deals.
The mortgage market is dynamic and innovative and intermediaries are able to manage that with lenders feeding the demand for them. If brokers start telling consumers to buy what the government declares is good for them rather than what makes commercial and financial sense, well we may as well pack up now.
Do I have any evidence to back up my statement, yes I do, look back over the past 10 years when every lender had to offer a CAT standard mortgage that was introduced as a benchmark product for the consumer designed by the government.
It ticked all the boxes in terms of a perfect product except it was extremely expensive. Surprise surprise consumers didn’t cause phones to crash to enquire about the product.
As a consequence, these products, as with similar products in the investment sector, were allowed to slip silently off the radar as a result of industry disregard and consumer inertia. That is the fate of many commercial products that have been designed in committee by a team of civil servants.
Sally Laker is managing director of Mortgage Intelligence
The views expressed in this article are those of its author and do not necessarily represent those of IFAonline or any other Incisive Media-affiliated organisationIFAonline
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