The world maybe at risk of another financial collapse and Brexit may send the UK economy off a cliff, but there is at least one positive outcome: it has never been cheaper to fix your mortgage payments for the next 10 years.
According to the latest research from the mortgage number crunchers Moneyfacts, the average 10-year fixed mortgage rate has decreased significantly over the past five years and now stands at an average of 3. 05%.
For those looking to borrow less than 60% of their home’s value with a super-clean credit history, there are astonishing deals to be had.
First Direct will now let you fix your mortgage payments for a decade at just 2. 44%, meaning some households would never have to remortgage ever again.
Coventry building society has an equally attractive deal. Its 10-year mortgage deal stands at 2. 55%, and it will lend up to 85% of a home’s value. Like the First Direct deal, there is no upfront fee to pay.
For comparison, the cheapest First Direct two-year deal is 1. 59% – assuming a 60% loan-to-value, but it comes with a £490 fee.
Ten-year mortgages are not for everyone, but if you have found your dream home and you have no plans to move again, they have to be considered.
The main benefit is that you know exactly what you’ll be paying until 2029, and you don’t have to think about your mortgage again. If mortgage rates return to the 4% to 5% typically seen before the financial crisis, you’ll be the smuggest person in the pub.
You also save because there are no remortgage fees – typically £999 and other legal expenses – to be paid every two/three/five years when shorter-term mortgage deals end.
The big downside is hefty early repayment charges, meaning if your plans change and you need to pay off the mortgage before the 10 years are up, the fee is typically 5% of the total sum borrowed in the first two years and 3% thereafter.
Darren Cook, finance expert at Moneyfacts. co. uk, says the availability of 10-year fixed rate products has ballooned over the past five years. He said that most deals allow you to take or “port” the mortgage over if you move house, provided the new purchase is on the same terms – although it often isn’t.
“A 10-year fixed rate mortgage will need a lot of consideration, with borrowers looking at all the options to make sure this is the right choice for their individual circumstances. But perhaps, given the current uncertainty, now is the time to make a long-term commitment, ” he said.