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Playing the long game

Jeni Browne discusses whether it's worth considering a 10 year fixed rate residential mortgage.

Recently a client asked me for a 10 year fixed rate home-owner mortgage. As I began researching, I admit I was thinking it was a waste of time, no one ever takes a 10 year fixed these days, they are always far too expensive. So when I saw a 10 year fixed at 3.89% (4.1% APR), I have to say I felt a little sheepish.

Now 10 year fixes aren't for everybody because of the exit fees which span the full 10 years. Many people worry about long term fixes because they took one in the past and then rates came down and their fixed rate ultimately looked rubbish. However today, I would argue to that person, this was when rates were being fixed at 4.5% and above, and Bank Rate was at 5%. Today rates are at an all time low and will go up. In times gone by, being able to fix for even five years at sub 5% was regarded as a good deal. So this 10 year rate to my mind, is a corker.

So other things to note. Its available to 70% LTV, the lender is fine with landlords, no restrictions on the number of properties in the background, and they will even take rental profit as income. There is a lender arrangement fee of £1,499 which will feel toppy but let's not forget that you won’t have to remortgage and pay another arrangement fee for 10 whole years – if you were to take a two year fixed with a lender arrangement fee of £1k, you will save yourself £3.5k over 10 years on arrangement fees alone.

As always, we are happy to talk through your options so if this is of interest please do give us a call on 0845 345 6788.

And finally, here's the small print:

3.89% fixed for 10 years (until 31/03/2024) reverting to Barclays Bank Base Rate + 3.39% for the remaining term. BBBR is a variable rate set by Barclays Bank PLC. BBBR typically follows Bank Rate but is not guaranteed to do so. Borrowers are obliged to take out a Barclays Mortgage Current Account as a condition of this mortgage. Overall Cost for Comparison: 4.1% APR. Early Repayment Charge: 6 of the outstanding loan if the mortgage is repaid before 31/03/2021, 3% of the outstanding loan if the mortgage is repaid before 31/03/2024, plus a final repayment charge of £80. Overpayment restricted to 5% of the outstanding balance per year without incurring ERC. Loan to Value: 70%. Lender Arrangement Fee: £1,499. Broker Fee: A broker fee of £497 will apply, (other fee options available). Repayment Options: Capital & interest repayment. Portability: Portable. Overpayments: Up to 5% of the outstanding balance per year.