Mortgages – should you opt for a long-term fixed rate?

When considering what is likely to happen with interest rates in the future, mortgage customers arguably face more uncertainty since the Brexit vote than in previous years. That being the case, how can you best protect yourself when it comes to managing your expenditure? One way would be to take a long-term fixed-rate mortgage deal … but would it be right for you?

The attraction of having a fixed-rate mortgage in a period of interest rate uncertainty – not to mention squeezed wages and rising living costs – is undeniably attractive. This is backed up by the recent increase in the availability of 10-year fixed-rate mortgages; according to Moneyfacts, the number of deals on the market has risen from fewer than 10 to well over 100 in the past three years. The rise in both availability and demand has also driven the cost down (from an average of 4.23 per cent to 3.2 per cent).

The downside of longer-term peace of mind, however, can be additional costs, both actual and potential. To start with there will be an arrangement fee – you can typically expect to pay around £1,000. The interest rate is also likely to be higher than if you were to fix your mortgage rate for a shorter term, such as two or three years. You can also expect to be tied in to the deal for the full 10 years; if you want to exit the deal early you may face hefty early repayment charges.

However, if you can be relatively certain that you can commit to the full term – and some deals are portable, so it doesn’t necessarily tie you to the same property – then it is likely that savings can be made if prevailing interest rates do start to rise. As always, check out what’s on offer and take the best option for you and your circumstances.

Author: Steven Miscandlon

Comments are closed.