TEN-YEAR DEALS – BUT MIND THE EXIT CHARGES

MANY lenders now offer borrowers the opportunity to fix their mortgage rate for the next ten years.

Such loans have most appeal among homeowners who have no plans to move home in the foreseeable future.

This is because onerous early repayment charges will be levied if a homeowner needs to break the deal – maybe because they want to move home.

‘Such early repayment charges can often amount to thousands of pounds,’ warns David Hollingworth at mortgage broker L&C, ‘so only take out a ten-year fix if it dovetails with your needs and future plans.’

Virgin Money provides one of the best ten-year fixed-rate loans at 1.95 per cent on a home where there is a minimum 35 per cent equity.

On a £170,000 repayment loan over 20 years, this would cost £856 a month. But early repayment charges apply throughout, starting at eight per cent (of the loan) in the early years – and then falling in steps to one per cent. So, someone redeeming in year one would face a charge of £13,600.

TSB’s approach to ten-year fixedrate loans is more flexible. On loans to value of up to 60 per cent, its mortgage rate is 2.39 per cent, but early repayment charges only apply in the first five years.

‘This loan gives a borrower the flexibility to continue with the rate or not after five years,’ says Hollingworth. ‘But the trade-off is that it isn’t the lowest ten-year rate.’

Brokers include John Charcol – charcol.co.uk – and landc.co.uk.