Connect with us

Money

Should you go for a ten-year fixed-rate mortgage, or would locking yourself in for a decade be bad for your financial health?

BORROWERS worried about how economic uncertainty could affect mortgage rates are snapping up long-term deals.

But while a ten-year fix may seem like the perfect solution, think carefully before locking yourself in for such a long period.

Borrowers worried about how economic uncertainty could affect mortgage rates are snapping up long-term deals

It is very hard to know where you are going to be a decade from now.

New figures show that while there were just eight ten-year fixed-rate products available three years ago, there are now more than 120 such deals to choose from.

Moneyfacts Charlotte Nelson says: Lenders are trying to muscle in on this new area of competition and this has caused this sector to grow.

Rates have fallen too, with the average ten-year fix dropping from 4.23 per cent in January 2014 to an average of 3.2 per cent this month.

That said, the average rate has edged up from a record low of 3.11 per cent in November 2016.

Charlotte adds: This could be an indication of what is in store for long-term fixed rates in 2017.

Here we take a closer look at the long-term fixes.

The upsides

Even with a slight increase in the average rate, a ten-year fix could give you the peace of mind of knowing your repayment will not change between now and 2027

Even with a slight increase in the average rate, a ten-year fix could give you the peace of mind of knowing your repayment will not change between now and 2027, whatever happens.

David Hollingworth, of broker London & Country, says: As the base rate is at an all-time low, locking into a mortgage rate for the long term is a sensible option.

It could not only cut monthly costs but also protect you from any future rate rises.

The downsides

If you need to exit a long-term deal during, you could face hefty early repayment charges

Most decade-long deals tie you in for the full term. If you need to exit during that time, you could face hefty early repayment charges.

It is vital you weigh up whether you will need flexibility in the decade ahead.

Where does long-term fixing make sense?

Deciding if you should go for a long-term fix depends on your circumstances

In the past, borrowers have tended to opt for shorter-term fixes of two or five years. However, as the rates on ten-year deals have got closer to those available on shorter-term deals, more borrowers have shown an interest in locking in for longer.

Deciding if you should go for a long-term fix depends on your circumstances. Mark Harris, of broker SPF Private Clients, says: If a first-time buyer is purchasing with friends, chances are that within ten years circumstances will change.

By contrast, those who are more settled, married with children in school, for example, may find they are better suited to a longer fix.



Deal gave us peace of mind

Alec Taylor, 35, and his wife, Robin Hamaker, 32, opted for the security offered by a ten-year fix for the home they are buying together in Cardiff

FIRST-TIME buyers Alec Taylor, 35, and his wife, Robin Hamaker, 32, opted for the security offered by a ten-year fix for the home they are buying together in Cardiff.

The couple are relocating from London and are just weeks away from moving in to a three-bed Victorian terraced house.

They went for a ten-year fix with Barclays at 2.49 per cent.

Alec says: With such competitive rates available on ten-year fixes, this seemed the right decision for us at a time of such political and economic uncertainty.

This deal gives us total peace of mind, knowing what our monthly repayments will be, no matter what happens.

We are not worried about locking in for the long term as we hope this will be our family home for at least the next decade.

Click to comment

Leave a Reply

Advertisement

Must See

Advertisement

More in Money