Dare you fix your mort­gage for ten years?

Daily Mail - - Money Mail -

A NEW ten-year fixed-rate mort­gage is aimed at home­own­ers fear­ful of a sud­den rise in in­ter­est rates.

Ac­cord, part of York­shire Build­ing So­ci­ety, has launched a decade-long deal at 5.24pc for bor­row­ers with a 25pc de­posit. With base rate at an his­toric low of 0.5pc and in­ter­est rates ex­pected to start ris­ing later in the year, this could prove a good deal for some­one want­ing to lock in their rate.

It has a £ 1,995 fee. Monthly re­pay­ments over 25 years on a typ­i­cal £150,000 loan would be £898 — and to­tal cost over ten years would be £107,760.

The pre­vi­ous govern­ment was very keen on home­own­ers lock­ing in mort­gage rates for the long term. This idea never re­ally took off as the rates were, largely, un­com­pet­i­tive.

David Holling­worth, from bro­ker London & Coun­try, says: ‘Peo­ple maybe know, roughly, what they are do­ing in five years’ time — but ten years is a long way ahead to plan.’

The prob­lem with longer-term loans is the penalty you pay for quit­ting the deal early — with Ac­cord, this is 5pc of your out­stand­ing loan in the first five years.

And they do cost more — for ex­am­ple, the best five-year fix is 3.99 pc with Bri­tan­nia/Co-op. Re­pay­ments would be £108 more a month on the ten-year deal — that’s £6,480 over the first five years alone.

But you should re­mem­ber that af­ter that pe­riod rates might well be far higher, so your next mort­gage could be much more ex­pen­sive. An al­ter­na­tive is a cheap life­time tracker. First Di­rect of­fers 1.89 pc over base rate (giv­ing a start­ing rate of 2.39 pc). Re­pay­ments would start at £665 a month.

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