Ten-year fixed-rate UK mortgages ‘are now incredible value’
Locking into a 10-year fixed-rate mortgage used to come at a considerable cost but as interest rates on shorter-term home loans have edged up, the price of a decade’s worth of certainty has fallen.
This week the best two-year fixed-rate mortgages had a rate of 2.54% for those borrowing 60% of the property’s value, while five-year deals were at 2.64% and the best 10-year rate was 2.73%.
“The margins between two-, five- and 10-year fixes have fallen, so it has become a much more favourable environment for people to consider a long-term deal,” says David Hollingworth of the brokers L&C Mortgages. “They’re not having to pay as big a premium for it.”
On a mortgage of £180,000 over 20 years the monthly price difference between the cheapest two-year deal and the cheapest 10-year deal is £16.78. Over the first two years, that means paying a total of £403 more. But in year three, you could be better off. Hollingworth says he can see fixed rates “going through 3% sooner rather than later”. They could go as high as 4% by the end of the year.
Mark Harris, the chief executive of the mortgage broker SPF Private Clients, says there is currently “some incredible value” on offer in 10-year mortgages. However, he adds: “It is important not to make your decision based solely on the rate because it could turn out to be an expensive mistake.”
Fixed-rate mortgages generally have early repayment charges (ERCs) that have to be paid if you want to pay off the loan early. On the cheapest 10-year fixed-rate, available from Lloyds for those remortgaging and Halifax for homebuyers, the ERC is 6% of the loan until 2027. It then falls each year so that in the final year of the fixed-rate period it is 1%.
While you may have no intention of repaying the
Read more on theguardian.com
