10 Year Fixed Rate Mortgage

by Mark Johnston

Home buyers can now benefit from lower fixed rate mortgage deals as the money market signals that a rise in the base rate is in some way off yet.

Historically 5 year fixed rate mortgages with a rate below 5% was considered a good deal, therefore seeing rates as low as 3.99% for a 10 term is quite remarkable.

Home owners are being offered an unprecedented opportunity to fix their mortgage payments for a whopping 10 year.

 At this present time there are around 6 lenders that offer 10 year deals: Leeds building society, Co-operative, Britannia, Yorkshire building society and Chelsea building society.

The Yorkshire building society deal is fixed at 5.99% on a 75% loan to value (LTV); the Britannia deal is fixed at 5.29% on a 75% (LTV). The Co-operative deal is offered at a fixed rate of 5.69% also on a 75% (LTV) ratio and the Leeds building society offer a 10 year deal on a fixed rate of 5.99% but on an 80% loan to value (LTV) ratio.

The Chelsea building society has the lowest rate at 3.99% with a fee of £1,495 but is only available to those with at least a deposit of 30%.

The Skipton building society has recently launched a 10 year fixed rate deal at a rate of 5.85% for up to 85% loan to value (LTV) with no fee. Kris Brewster, head of products at Skipton building society said “10 year ‘swap’ rates are close to their lowest levels ever, enabling us to offer a rate of 5.85%,which is a very cost affective proposition over a decade term for those customers suited to this kind of product.

These decade long deals at cut prices have upped the stakes in the battle between lenders to lock good borrowers on to the longer term deals.  

The big draw back to these particular deals however is that homeowners can face hefty exit fees of up to 7%, if they wish to leave the deal early. Also whilst some lenders may allow the mortgage to be transferred to a new property it is not always guaranteed.

Taking out a long term mortgage offers borrowers the chance to budget for a longer period as they know the amount they are paying every month. Although these deals do mean that with payments fixed till the end of the deal they will not be affected by interest rates going up or down.

Longer term fixes could offer an important alternative to those who are expecting to remain in their homes over the long term, who prefers to have payment certainty, over a fixed term and value long term financial planning.

A review of the UK mortgage market suggests that long term fixed rate mortgages could bring benefits to the UK market and move away from a more volatile environment.

Even though mortgage deals have never been as cheap as they are now. Some people will still delay their decision to switch in the hope that rates will fall even further.

It is human nature to always want to get the best deal possible, but if borrowers hold out too long there is always a risk that the tide will turn and the rates will be on the rise again.

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