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First-time Buyer

Halifax to launch 10-year sub-4% mortgage deal

Paloma Kubiak
Written By:
Paloma Kubiak

Halifax will launch a 10-year mortgage deal priced at 3.99%, putting the rate in the territory of five-year fixed rates. But is it worth locking in for a decade?

From tomorrow (15 February), Halifax will reduce rates on its homebuyer range by up to 0.36%, with deals available via brokers and direct.

Its 10-year fixed rate at 60% LTV (40% deposit) will fall from 4.35% to 3.99%, while its 10-year fixed rate at 75% LTV (25% deposit) will be reduced to 4.04% from 4.4%.

Both come with a £999 fee and loans are available between £25,000 and £1m.

Halifax confirmed that for any borrower taking out this deal, the Early Repayment Charge (ERC), if you want to end the contract within the term, will be as follows:

  • 6% to 30/06/2028
  • 5% to 30/06/2029
  • 4% to 30/06/2030
  • 3% to 30/06/2031
  • 2% to 30/06/2032
  • 1% to 30/06/2033.

In the last couple of weeks, a mortgage rate war has broken out, with the likes of Yorkshire Building Society, Virgin Money and HSBC launching sub-4% mortgage deals on five-year products.

According to data site Moneyfacts, Lloyds Bank has offered a 10-year remortgage product fixed at 3.99% since 9 December 2022, while Virgin Money also released a 3.99% 10-year deal on remortgage and purchase products from 31 January 2023.

It revealed that the average 10-year fixed rate mortgage stood at 4.33% on 1 September 2022  (ahead of the disastrous mini Budget), before climbing to 5.41% at the start of October 2022. It rose to 5.69% in December, before falling back to 5.47% in January and 5.34% in February 2023.

However, as of today, the average rate stands at 5.06%, while the number of products in this category stands at 159, up from the 105 deals in the aftermath of the mini Budget.

Approach with caution

Mike Staton, mortgage and protection advisor at Staton Mortgages, said: “While these headline rates may appear enticing to a mortgage applicant, swap rates indicate that fixed rates will drop further.

“I don’t see a big uptake from clients who receive advice from a qualified broker for 10-year fixed rates. A lot can happen in this long time frame and you will more than likely find yourself paying a penalty to exit from the mortgage within the fixed period.

“For me the three- and five-year fixed rates appear attractive enough at the moment, and come with a lot more flexibility than the 10-year fixed.

“Just ask yourself why 10-year fixed mortgages were rare when rates were in the low 1% bracket.”

Staton revealed the current best buy five-year fixed rate deal stands at 3.95%, while the two-year rate is 4.25%.

“These appear to be the cheapest available which shows you are missing out if you do not speak to a broker,” he added.

‘Could be good value’

According to David Hollingworth, associate  director, communications, at L&C Mortgages, the longer-term fixed rates are “unusually” offering rates that are lower than what is available on two-year deals.

“That will be down to what the market expects over the longer-term so although base rate may have further to climb in the meantime, there may be room for that to ease over the medium to longer-term”, he said.

Hollingworth added: “Of course, there are no guarantees and what the markets expect doesn’t always come to pass so a ten year fix could prove to be good value over the longer run.

“However, it is important to consider that in the majority of cases a ten year fix will carry Early Repayment Charges throughout the fixed rate term.  That could limit flexibility to shop around at a later date, whether that is due to a change in the rate environment or as a result of moving home.”

Back in September 2022, Nationwide repriced its 10-year deal to 4.24% (85% LTV, fee-free), which meant that it was cheaper than the equivalent two-year deal at 4.79%.

At the time, brokers said it was “uncharted territory”, adding that it was a “win/win” situation for lenders as they urged borrowers to approach with caution.

With the cost-of-living crisis, many people will be looking to minimise their outgoings and may want the certainty of a predictable rate over a longer time period.

However, they said that it’s important to speak to an independent and whole of market mortgage adviser to review all options as a lot can change in a decade, and 10-year fixed deals “lack flexibility”.

Earlier this month, the Bank of England raised the base rate for the tenth consecutive time as it reached 4%. In its updated forecast, it expects the base rate to rise to 4.5% by mid-2023, falling back to 3.25% in three years’ time.