Whether you’re looking to remortgage, move to a new house or take your first step onto the property ladder, there has never been a better time to consider taking a 10 year fixed rate mortgage, as Gavin Richardson, Head of Residential Mortgages explains.
Why you should consider taking a 10 year fixed rate mortgage...
1. Protect yourself against rate rises
What strange and volatile times are these? Protracted Brexit negotiations, Donald Trump is President of the United States of America, who knows what else is around the corner? Rate rises? Probably.
2. Rates are very, very low
Mortgage rates are as low as they have ever been. There’s only one way they can go from here. In my opinion, there will never be a better time than now to lock into a fixed rate for the longer term. The very cheapest two-year fixed rates are currently priced below 1.5% (think Santander and Nationwide), while the best five-year fixes start at around just below 2% (think Virgin Money). Compare these with the 2.65% (3.33% APRC) you’ll pay for the best-value 10-year deal (Coventry). For someone with a mortgage of £150,000, locking in for 10 years with the Coventry would mean monthly payments of £685, while a two-year fix with Santander or Nationwide would cost around £589 a month. In my opinion, it’s a no-brainer.
3. Peace of mind
To some, knowing exactly how much your monthly mortgage payment is going to be for the next decade, no matter what happens to the Bank of England base rate, is clearly attractive. But peace of mind comes at a price – in the example above around £100 a month – but someone taking a 10-year fix won’t have to go through the rigmarole of remortgaging in two years’ time, paying fees and facing potentially higher interest rates.
4. Fewer fees to pay
It’s notable that most of the 10-year deals require a large deposit. For example, Coventry’s 2.65% rate is only available to those able to put down 25%. However, arrangement fees, typically around £1,000, are little different to the fees borrowers have to pay for a two-year deal. So, if you keep bouncing from one two-year fix to the next, you’ll pay around £5,000 in arrangement fees over a decade compared to the one-off £1,000 on a 10-year deal.
5. Take the mortgage with you when you move
Some lenders who offer 10 year fixed rate mortgages will let you ‘port’ the mortgage onto the new property when you move. This means you won’t get penalised with Early Repayment Charges.
Why you shouldn’t go down the 10 year fixed rate mortgage route...
If your mortgage is not portable, remember that the typical homebuyer is likely to move three times before they hit 45, and eight times during their lifetime which means that locking into a very long-term deal may not suit everyone.
Early Repayment Charges
The biggest drawback to taking out a long-term fix is what happens if you need to break it? For example, if you are made redundant or you get divorced. Early repayment charges can be high, even after many years of paying off a loan.
Coventry charges a sliding scale of ERCs starting at 5% of the outstanding loan in year one, dropping to 1% in years 5-10.
Still want to fix for 10 years?
If fixing for 10 years still appeals do get in touch to talk through the options. I can be reached directly using the contact details below, or speak to anyone on the Residential Desk – we are all experience, qualified mortgage advisers, happy to point you in the right direction.
>> See how we helped our client secure a fee-free 10 year fixed rate and complete within 7 days
Call me on: 01732 471613