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Charcol slates Chancellor's mortgage purge

After new chancellor of the exchequer Alistair Darling revealed radical plans to get more people long-term fixed rate mortgages, many lenders have reacted with displeasure.Mr Darling claimed that mortgage lenders tended to restrict consumers to short-term mortgages in order to charge extortionate arrangement fees.Yet, a spokesman for online mortgage broker Charcol insists that, to the contrary, lenders actually prefer homebuyers to take out longer term fixed rate deals.Speaking on BBC Two's Working Lunch programme, Ray Boulger said: "The problem for lenders is that the market is so competitive that despite the high fees, which are in effect subsidising the interest rate, they struggle to make any money unless either people stay with the lender after the deal finishes and pay the standard variable rate, or unless they can cross sell some other products which will not be good value for the consumer."But as consumers have got more savvy over the years, few consumers stand around and pay the standard variable rate; they move onto a new deal afterwards. So from a lender perspective moving borrowers onto even a five year fix would be a big win."For the Chancellor to suggest that lenders prefer borrowers to take a short term deal like two years, just because the arrangement fees are high, suggests to me he has not done his homework very well," Mr Boulger concluded.

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