Rise in homeowners considering 10-year mortgage fix
Over a third of homeowners with a mortgage said they would consider fixing their next deal for a decade, according to research from Mortgage Advice Bureau (MAB).
Almost 68% of those surveyed feel that fixing their mortgage for ten years would give them financial peace of mind, while 56% want to protect themselves against interest rate hikes.
Brian Murphy, head of lending for MAB, said this rise comes as no surprise due to an increase in the number of lenders bringing new products to market over recent years.
He said: “Borrowers clearly want to know that they are making a sensible financial decision and that they are safeguarding themselves against potential financial risks such as interest rate changes.
“Knowing exactly how much your mortgage repayments are going to be for the next decade offers obvious reassurance for consumers, regardless of what happens to the Bank of England base rate, which, as we are already aware, is almost certain to increase at some point this year.”
Murphy said decade-long fixed rates have been available for some time, but awareness of them is low. But once borrowers discover these products are on the market, the appeal for some is easy to understand.
“That’s because the security of a ten-year deal will see certain types of borrowers through to a significant point in their lives, such as perhaps seeing children off to university or reaching retirement age,” he said.
“Alternatively, some borrowers may find that ten years is the length of time they have left on their mortgage, and therefore fixing for the remainder of the term provides an inevitable amount of reassurance.”
Shaun Church, director at mortgage broker Private Finance, added that aside from the immunity from further rate rises, locking into a 10-year fix as opposed to a two-year fix will only cost borrowers 1.02% more in terms of monthly repayments.
“Previously, borrowers would have to pay a premium to lock in for the long-term. But it’s important to note, however, that these long-term products aren’t for everybody, and are best suited to borrowers who have no plans to move in the near future.”
Borrowers will need to consider the significant Early Repayment Charges associated with them, so it’s worth checking the small print and doing your sums to decide what works best for your own circumstances.
Related: See YourMoney.com’s essential guide on How to remortgage for more information.