29 June 2020

Barclays launches ten-year fixed-rate mortgage at 1.99%

Borrowers in the market for long-term security can secure a ten-year fix at just 1.99 per cent from Barclays, as long as they have a 40 per cent deposit. The lender launched the long-term fix, the cheapest it has ever offered, last week as banks compete for business.

There is only so much lower a ten-year fixed rate can fall. This is an exceptionally cheap rate for long-term security, which may be more welcome now than ever given the pandemic and concerns about future job prospects and interest rates.

However, most borrowers tend to view a five-year fix as a long-term commitment. Ten-year fixes have been around for decades but they have never proved to be particularly popular. The main issue with them is that most people have little idea where they will be or what they will be doing in ten years’ time. Most longer-term fixes have hefty early repayment charges (ERCs) so if you have to get out of the mortgage during those ten years because your circumstances change, it could cost you thousands of pounds to do so. The Barclays deal has a 5 per cent early repayment penalty, for example, while other lenders offering ten-year fixes reduce the ERC during the fixed term.

It depends on what stage you are in your life – if you are a first-time buyer purchasing with a group of friends, then a ten-year fix doesn’t make much sense but if you are buying a forever home it might be a more reasonable choice.

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