Suitability of a long-term fixed rate mortgage

Mr Jannels says potential takers include the risk adverse type consumer who wants to know their costs will be fixed for a long period of time; those who have a variety of income sources; and those who might be coming to the end of their mortgage term.

Therefore, these deals could clearly prove to be very popular with baby-boomers approaching retirement who will now have access to their pension pots. Most of these deals also allow an element of penalty free overpayments, he adds.

A long-term fix would work for those that really want to know where they stand over the longer term, says David Hollingworth, associate director for communications at London & Country Mortgages.

That could be anyone but Mr Hollingworth says given that a first-time buyer for example may see a need to move it may carry less appeal as they want to keep their options open.

He says: “Those that perhaps can look ahead and see no real need to review their borrowing requirements with some certainty might very well like the chance to lock their rate in at the bottom.

“With the base rate only really able to go one way the chance to secure a low rate for the long term could mean low costs for the long term.”

When considering who a long-term fixed rate mortgage may be suitable it is interesting to look at the marketing spiel around the launch of the market’s first five year fix at less than 2 per cent.

Available at 60 per cent loan-to-value at 1.24 per cent, Tracie Pearce, head of mortgages at HSBC, was clear that the loan wasn’t just aimed at those in later life.

Speaking at the launch of the deal on 20 April, she says: “We are committed to helping customers take their first step onto, or move up, the property ladder.

“With mortgage rates lower than they’ve ever been before, we’re proud to introduce the lowest ever five year fixed rate.”

Charlotte Nelson, press officer of Moneyfacts, says the deal was the lowest on record that Moneyfacts had seen.

She says: “This deal is likely to be a popular choice for any borrower with the required 40 per cent deposit, and will make a cost effective option over the longer term.”

So, clearly, this long-term deal was pitched as potentially suitable for first-time buyers.

But Calum Bennie, savings expert at Scottish Friendly, says the breaking of the 2 per cent barrier for a five-year fixed rate mortgage is unlikely to help most first-time buyers who are the ones that really need help getting on the housing ladder because of the need to provide a 40 per cent deposit.

Mr Bennie says therefore despite the official line from HSBC this mortgage deal is more likely to appeal to those with plenty of money to spare, in particular retirees who have taken advantage of their new-found pension freedom and who want to use this to invest in property.

He said: “With interest rates remaining low and house prices outstripping wage growth, the launch of the HSBC mortgage, in the short-term at least, is unlikely to tip the balance for home ownership becoming anything other than the preserve of the wealthy and the retired.

“This does not mean that aspiring first-time buyers should just give up. The market may adjust itself over the long-term and, if it does, those that are ready to pounce on an opportunity will benefit most.”