Borrowers keen to fix their mortgage for the long term can now pick from a greater choice of products in the 10-year market.
Although most people usually opt for two or five-year fixed rates when taking out a mortgage, there are increasing numbers of deals which will lock in your rate for a decade, according to the latest analysis.
And because these numbers have soared from 101 products in May 2018 to 158 today, it means the rates have now started tumbling.
While the average 10-year fixed rate mortgage had a rate of 3.11% back in May 2018, it’s now plummeted to 2.76%.
According to Darren Cook, finance expert at Moneyfacts.co.uk, four more providers have entered into this market in the last year which has helped boost the numbers of deals available.
Pros and cons of a 10-year mortgage
One of the main reasons borrowers are keen to take out these deals is because they provide protection against any interest rate rises which may happen over the next decade.
What’s more it also means they do not have to go through the hassle of a remortgage after only two years. In fact, borrowers who do not want to remortgage following a two-year deal will automatically default to their lender’s standard variable rate (SVR) which can also be expensive. This makes the 10-year fix a good option if you are likely to fall into this category.
But these longer term deals also provide less flexibility. Cook explained: “During a period of economic uncertainty, borrowers may be considering alternative ways to shield themselves against interest rate fluctuations and assure some stability in household expenses for the longer-term.
“A 10-year fixed rate mortgage is a large commitment, so potential borrowers need to feel confident that their circumstances are unlikely to change in the foreseeable future to benefit from the longer-term certainty that this product provides.”
Who are 10-year mortgages suitable for?
Cook also advised 10-year fixes were more likely to suit people who were remortgaging or buying their second home.
For first-time buyers, who were looking for mortgages with only a 5% deposit, a 10-year stretch would may be too long because they would probably want to remortgage sooner to take advantage of lower rates when they had injected some equity into their home.
Cook added: “As with any mortgage, it is important that borrowers weigh up the overall true cost of any deal and make every attempt to overpay their mortgage to reduce the amount they owe – especially if they lock into a low rate.”
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