Mortgage lenders launch longer term fixes
Mon, Sep 23, 2019
A growing number of lenders have launched 15-year fixed rate mortgage deals for homeowners seeking long-term security.
Virgin Money introduced its range of 15-year fixed rate deals earlier this summer, with Yorkshire Building Society and its broker brand Accord following suit in recent weeks.
Accord’s 15-year deal is available via brokers to those with a 25% deposit to put down, while Yorkshire’s range of 15-year fixed rates includes deals for those with a 10%, 15%, 25% or a 35% deposit. All Yorkshire’s deals come with a free standard valuation and a £495 completion fee.
The building society said that it was responding to demand from homeowners for longer term deals. Its own data showed a 50% increase in demand for decade-long fixed rate mortgages between 2018 and 2019.
Charles Mungroo, senior mortgage manager at Yorkshire Building Society, said: “Demand for long-term fixed rate mortgages is increasing year-on-year and with continued political and economic uncertainty, borrowers’ appetite for securing longer-term deals shows no sign of slowing down.
“We hope the introduction of the new 15-year range gives more choice to those looking for peace of mind that their monthly mortgage repayments won’t change for a significant number of years.”
Pros and cons of long-term fixed rates
Long-term fixed rates usually appeal to homebuyers wanting to avoid any uncertainty, and perhaps see out their mortgage on the same rate. They can also be a good option for those who might be financially stretched and who’d be unable to cope with steeper payments if interest rates rise.
However, if you’re considering locking into a fixed rate mortgage for 10 or 15 years, you’ll need to think carefully about whether your circumstances are likely to change during this time.
Most fixed rate deals have Early Repayment Charges (ERC’s) if you want out at any stage during the fixed rate, so you must be comfortable tying yourself in for the long term.
Although most long-term fixed rates are portable, which means you can take them to another property if you decide to move home during the mortgage term, this may not be as straightforward as it sounds.
That’s because when transferring a mortgage, you effectively need to re-apply before your lender will agree to move it across. You’ll therefore need to meet lending criteria at that time. If you need any additional borrowing, this is likely to be at a different interest rate to your existing mortgage.
It’s also worth bearing in mind that there’s a price to pay for long term security, so 10 and 15-year fixed rates are usually higher than 2, 3 and 5-year fixes. No-one knows what will happen to rates in future either, so locking in for the long-term could mean you lose out if rates drop further.
Of course, the opposite is also true, so if rates rise in future, you may end up sitting pretty if you’ve locked into a particularly competitive deal.
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