A mortgage which allows you to fix your rate for a ‘highly unusual’ 15-year term has been launched today by Virgin Money.
According to experts, this is the only 15-year fixed deal on the market, apart from a soon-to-be-released mortgage for older borrowers announced last week by Leeds Building Society.
The last time a mortgage with such a long term was available was back in 2009 when Britannia Building Society offered a product which allowed borrowers to lock into the interest rate for 15 years.
Virgin Money’s latest offering has been hailed as having competitive rates, which are even attractive to customers with small deposits. Indeed, the new range offers rates starting at 2.55% and is available for those who need to borrow as much as 95% of their property’s value.
Andrew Asaam, director of mortgages at Virgin Money, said fixed rates of longer than 10-years were not generally available in the UK market.
“Given the economic backdrop,” he added, “they can be a perfect choice for borrowers who are looking for longer interest rate certainty.”
What are the pros and cons of 15-year fixes?
Financial data analysts, Moneyfacts, said Virgin Money was a trusted brand and it was great it was expanding its range for prospective borrowers. It said the main advantage of fixing your mortgage rate for 15 years was that it would save on the cost of remortgaging.
However, locking rates in for this long could cause problems if your circumstances changed or interest rates fell. Indeed, early repayment charges would apply and this could prove expensive.
Rachel Springall, a financial analyst at Moneyfacts, said it was ‘highly unusual’ to see a 15-year fixed rate mortgage on the market today but this term may appeal to borrowers who wanted to secure a rate for the longer term.
She added: “It’s not impossible for this niche term to gain some attention as it is worth remembering that 10-year fixed mortgages have boomed over the past five years or so and there now are now over 150 options to choose from.”
Chris Sykes, a mortgage consultant at Private Finance, said a 15-year fix was a considerable commitment and therefore wouldn’t be suitable for everyone.
“Those anticipating a move within this time frame will likely to be suited to a shorter-term product,” he added.
“However, homeowners in their ‘forever home’ looking for a way to guarantee their monthly repayments may well be tempted by the prospect of financial security that lasts beyond the next decade, particularly in today’s uncertain times.”
Virgin Money said the new mortgages would benefit from ‘flexible features’ which included the ability to make overpayments of up to 10% per year without penalty. It also allowed payment holidays and, if the borrower moved house, the mortgage was portable so could be used for borrowing on the new property.
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