Dare you fix your mortgage for ten years?
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.