Average fixed-rate lifetime mortgage cost 'increasing'

Date:Monday 23rd August 2010
Author: Susanna Kavka

The average cost of a fixed-rate lifetime mortgage has increased when compared with a long-term fixed-rate product.

This is according to Defaqto, which carried out a study comparing the cost of the two products for mortgage holders.

It noted that the cost between the two products has widened considerably during the past two years, but highlighted that the no negative equity guarantee is responsible for around 0.7 per cent of additional costs to providers each year.

In August 2007 the difference between the two products was 0.63 per cent, while this month the company found that the average stood at 1.45 per cent.

David Black, banking specialist at Defaqto, said: "Increased competition should result in a narrowing of the interest rate gap between lifetime mortgages and long term fixed-rate residential mortgages."

However, Halifax recently noted that the cost of repaying a mortgage was at its lowest point in 25 years.