The cheap­est 10-year mort­gage deals ever

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

Scottish Daily Mail - - Daily Mail Campaign - By James Salmon As­so­ciate City Edi­tor

‘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.

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