Auctioneers advise fixed-rate loans

AUCTIONEERS are urging homeowners to take out long-term fixed mortgages to avoid the risk of stiffer repayments in the event of interest rates rising again.

Encouraged by the current historically low interest rates, an increasing number of mortgage holders are opting for variable loans, according to the latest official statistics. Five years ago, 68.9% of loans approved were fixed. Now, six out of every 10 mortgage holders have variable loans. While this was a low level of fixed mortgages, economist Jim Power said at the weekend, if one considered a large proportion of those fixed loans were discounted fixed rates for a one-year period, then the underlying situation was less than stable.

“A high percentage of loans fixed for periods as long as 10 years would provide a huge level of insurance for individuals, the housing market and the overall economy,” Mr Power told the annual conference of the Institute of Professional Auctioneers & Valuers (IPAV).

IPAV is recommending to the Government a voluntary code of conduct be set up for lending institutions in relation to mortgage provision. The institute is also urging a concerted effort be made to encourage borrowers to lock into long term fixed mortgages.

“Deregulation of financial markets played a major part in the creation of the UK property bubble in the late 1980s, which burst with devastating effect,” incoming IPAV president Paul Gartlan told delegates. “The recent announcement by the Central Bank of Ireland to investigate the mortgage lending practices of Irish financial institutions is a welcome recognition of the dangers of a similar occurrence in Ireland. It was in the long-term interests of all players in the Irish housing market that the stability and integrity of the housing market was guaranteed.”