The cheapest 10-year mortgage deals ever

Fixed rates have almost halved since 2011 – with best deal as low as 2.2%

‘Economic uncertainty’

BANKS are offering the cheapest ten-year fixed mortgages on record in a Christmas price war.

homeowners can secure a fixed rate as low as 2.2 per cent for a decade as lenders battle to win business amid uncertainty over Brexit.

The average ten-year fixed rate is just 2.76 per cent – down from 3.08 per cent a year ago, according to Moneyfacts.

Analysts say the markets for two- and five-year deals are already close to saturation after aggressive rate cuts. Moneyfacts revealed this month that banks are already offering five-year fixed deals at below 1.5 per cent for the first time.

This stiff competition and a sluggish property market have prompted lenders to turn their attention to ten-year fixed mortgages instead. There are now 158 different decade-long deals available from 17 banks and building societies.

The average rate has almost halved since 2011, when there were just nine deals available. Taking the typical rate of 2.76 per cent and the average product fee of £996, a family taking out a £150,000 home loan in January would pay £698 a month until 2030, regardless of what happens to interest rates.

The market’s traditional targets are homeowners looking to re-mortgage and those looking to move up the property ladder, rather than first-time buyers.

Of the 158 deals available, 108 only cater for those with equity or a deposit of at least 25 per cent. however, two ten-year deals are available to those with just a 5 per cent deposit. Despite the record low rates, analysts said lenders will struggle to persuade many borrowers to commit to a ten-year deal.

Darren Cook, finance expert at Moneyfacts, said: ‘Most people feel uncomfortable locking into a rate for so long... but, during a period of economic uncertainty, borrowers may be considering alternative ways to shield themselves against interest rate fluctuations and assure some stability in household expenses for the longer-term.

‘A ten-year fixed rate mortgage is a large commitment, so potential borrowers need to feel confident that their circumstances are unlikely to change in the foreseeable future to benefit from the longer-term certainty that this product provides.’

The cheapest ten-year fixed rate deal, offered by Coventry Building Society, is available to those with equity of at least 50 per cent. Its 2.2 per cent rate is available for a £999 product fee – but the deal also comes with hefty penalty charges on the outstanding mortgage.

Industry figures show more than nine in ten borrowers are picking fixed-rate deals over variable mortgages. The vast majority are opting for two-year fixed rates, available with rates as low as 1.05 per cent.

David hollingworth, of London and Country Mortgages, said more popular short-term deals remain significantly cheaper and warned borrowers to also be aware of hefty early repayment charges on longer-term fixed loans. however, he added that ten-year fixed deals ‘can give you the comfort of knowing exactly how much you will be paying over the next ten years’.

The Bank of England’s base rate has been held at 0.75 per cent since last August. Some analysts believe Brexit uncertainty will see this cut back to 0.5 per cent.