10 Year Fixed rate choices
The Bank of England Governor, Mr Carney told the BBC in April: “Prepare for a few interest rate rises over the next few years.”
In wake of the news some Mortgage Lenders reacted by increasing their mortgage rates on long term fixes.
As a consequence we have witness an unusually number of calls from clients requesting 10 year fixed rates, which has prompted me to write this blog on which way to turn.
Advantages of long term fixed rates
- It does make life easier if you can set the payments on your mortgage as it’s probably the largest commitment you have.
- Less reviews to worry about. One less bill to remember when you come to the end of the promotional rate.
- Continual Remortgage costs avoided. When you switch rates you can incur a mortgage valuation, lender arrangement and legal fees.
- Based on your status at inception of the mortgage. You might be able to foresee a likely drop in future income which would prevent you from remortgaging. For example, giving up work to bring up a family or going into semi-retirement.
Disadvantages
- The rates are usually higher than shorter term fixed rates and you are locking in for a long period. Ahead of the last recession in 2008 many people were left on high rates, despite as interest rates tumbling for those on variable rates. It was hard to take particularly with the economic backdrop being so severe.
- Unforeseen life changes. Martial splits, premature death of a partner, job relocation, school catchment areas, needing to move closer to a vulnerable person … the list is really endless. Think back to how things were 10 years ago. It’s a long time.
- Not portable. Some mortgages, particularly from specialist lenders or on buy-to-lets are non-transferrable to another property. Long term fixes often carry the highest early repayment charges, especially in the early years. Even if they are “portable” and should you want further borrowing, you might be limited on product choice and left with an early repayment charge period mismatch which can complicate future remortgage opportunities.
As a Mortgage Advisor I see it as my role to educate of these advantages and disadvantages, and others, depending on the individual applicants circumstances and needs. I need to be clear though I cannot guarantee market movements, no one can, not even Mr Carney.
Niche Advice offers suitable mortgage advice on all types of mortgages including 10 year fixed rates. So find out more please complete the Contact Form on this webpage or call T: 020 7993 2044.
Author: Payam Azadi
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Mortgage Brokers. His role is very much focused on Property financing both on residential and commercial lines. To get in contact with him please click here.
