Uncertainty surrounding Brexit is said to be behind the increase in the number of ten-year fixed rate mortgages, with 150 options on the market compared with 16 deals just five years ago, according to Moneyfacts. This competition among lenders, along with the prevailing low interest rate environment, means the average rate for a ten-year fix is now 3.05 per cent. The cheapest rates start from just 2.49 per cent.
And yet, as a mortgage brokerage, SPF Private Clients has seen very little demand from clients for longer-term fixes of ten years or more. The trouble with a ten-year fix is that while you are protecting yourself from potential interest rate rises for a significant period of time, there are early repayment charges if you wish to get out of the mortgage during that time. A lot can happen in ten years and most people don’t feel happy committing themselves for that length of time.
Indeed, if Brexit leads to a recession the next move in interest rates may well be downwards – if that is the case, you may regret fixing your mortgage for ten years.
But while fixing for ten years isn’t on the agenda for many, shorter fixes are proving more attractive, with plenty of borrowers opting for medium-term security in the form of a five-year fix. These aren’t priced much higher than two-year fixes – with the cheapest rates starting at less than 2 per cent – while you don’t have to remortgage quite as much as you would if you opted for the shorter fix.
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