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UK House prices predicting general election result

The 10-year Fixed Rate Mortgage Gamble

Housing-Market / Mortgages Nov 10, 2015 - 12:24 PM GMT

By: MoneyFacts

Housing-Market

With uncertain times ahead with regards to base rate, many borrowers are looking for long-term mortgage repayment security to shield them from future, unpredictable rate rises.

Ten-year fixed rate mortgages do just that, and data from Moneyfacts.co.uk shows that the number of deals available has almost doubled in just one year to meet growing demand. And in even better news, the interest rates being offered have also fallen.


Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, said:        

“Lenders are clearly targeting borrowers who are fearful of potential base rate rises, with the number of 10-year fixed rate deals available increasing by 96 in just two years. This increase in choice is great news for borrowers who are looking for security.

“Locking into a decade-long deal now will allow borrowers to rest assured that their monthly repayments will not go up until at least 2025, which could be seen as a wise move when base rate picks up from its historic low and mortgage rates follow suit, particularly as the average 10-year rate stands at just 3.54% today.

“Borrowers have often considered a five-year fixed term as “long term”, but reconsidering this view and committing to a low rate 10-year fixed mortgage may pay off when base rate does rise. For example, a rise of just 1.00% on today’s average standard variable rate (SVR) of 4.82% would cost borrowers an extra £1,254.69* a year.

“However, while we know base rate will eventually rise at some point, we do not know when or by how much, which makes taking out a 10-year deal a gamble, particularly as rates across the overall mortgage market are currently so low.

“Borrowers must also bear in mind that most 10-year mortgages require them to be tied to the deal for the full term, so it is vital that they weigh up whether they will need extra flexibility, such as being able to transfer the mortgage to another home. Failing to do so could mean borrowers end up paying a hefty early redemption penalty.

“There is clearly a demand for longer-tem fixed rate mortgages, and with 10-year fixed rates cheaper than ever before, borrowers will have to weigh up the odds and assess whether the gamble will pay off.”

*Based on a £200,000 mortgage over a 25-year term on a repayment only basis.

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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