Long-term v short-term mortgages

Mortgage lenders are beginning to heed the government's call and offer their customers longer-term fixed rate mortgages, in a move away from the popular short-term "tracker" mortgages.

Leading the way with the long-term mortgages (certainly in terms of longevity of loan) are London & Country, who in partnership with Manchester building society, offer a 5.99% fixed rate mortgage which can be taken out for up to 30 years.

But are long-term fixed mortgages necessarily the best? The sudden switch to longer-term fixed rate mortgages is a response to the government's efforts to bring greater stability to the housing markets, partly due to the crisis in the US sub-prime housing market. But does that mean long-term fixed rate mortgages are in turn the best for the customer?

On the one side, long-term fixed rate mortgages have the added security of knowing exactly how much the monthly repayments are going to be. However, the typically high initial arrangement fees and the penalties incurred for an early release from the mortgage, make them less forgiving to lifestyle changes. With this in mind, recent years have seen an increase in the number of customers choosing shorter-term variable (or "tracker") mortgage packages.

This trend is commonly attributed to the fact that tracker mortgages can appear cheaper, both in terms of APR and initial arrangement fees. However the advice to customers is that they should only opt for a tracker mortgage, if they have the financial bandwidth to cope with a potential rate rise. If they don't, then a short-term tracker can become extremely high risk.

This is particularly relevant given the number of interest rate rises by the Bank of England over the past 12 months.