Explosion in decade-long mortgage fixes

Research from Moneyfacts reveals that the number of 10-year fixed rate mortgage deals on the market is rising fast.

The battle to keep mortgage borrowers on side has moved on from the popular two- and five-year fixed rates to an explosion of 10-year deals, increasing from just 12 in November 2013 to 51 today.

Along with an increase in choice, the interest rates being offered are falling, too. In the last month the average rate fell from 4.98 per cent to just 4.33 per cent, the lowest level for a 10-year fixed rate deal ever.

 Lenders who borrowed from the Government’s Funding for Lending Scheme need to show they have lent the money out in mortgages and that their mortgage books have grown. They have just four years from borrowing the money to do this.

 At the same time, constant talk of a Bank of England base rate rise is making many borrowers jumpy as the prospect of increased monthly mortgage payments loom.

 Sylvia Waycot, editor at Moneyfacts.co.uk, comments: “The two-year fixed rate mortgage is the favoured choice of many borrowers who like the structure of knowing what their monthly payments will be, but also the flexibility of a short term.

“However, while 10-year fixed rate deals may cost more per month than the current two or five-year fixed rates, over the life of the mortgage (bearing in mind that the interest rate is unlikely to fall) borrowers are potentially locking into the cheapest deals for a whole decade, especially if and when shorter fixed term rates do start to rise.

“A borrower who favours two-year fixed rate deals will have had five deals and also five sets of setting up fees in the time it will take for one 10-year deal to expire.

“However, when considering a 10-year fixed rate, it is important to make sure that the deal is portable, as you may need to move to a bigger or smaller home in the future and you won’t want to incur early redemption fees, which can be high.

“The stage is set for borrowers to embrace the longer fixed rate mortgage; there are more on offer and they are cheaper than ever before.

“The question is, are borrowers prepared to fix for a decade, bearing in mind the popularity of the short term fixed?”