The soaring popularity of the 10-year mortgage fix: Ten times more deals on the market than five years ago and rates have come down by a third
- Interest charged fallen from an average 4.61% to the current 3.05%
- 10-year fixed rate slightly higher than in January 2018, when it stood at 3.02%
Home buyers looking to fix their mortgage for a decade to protect themselves from interest rate rises have seen the choice of deals jump ten-fold in just five years, new research shows.
The number of ten-year fixed mortgages has gone from just 16 deals available in January 2014 to 150 deals available now.
And the rate of interest charged has dropped by nearly a third: from an average 4.61 per cent to the current 3.05 per cent, according to research my Moneyfacts.co.uk – although rates are now slightly up on this time last year.
Ten-year fix: Home buyers wanting more insulation from interest rate rises have more choice
One of the advantages of taking out a longer fixed rate is that you don’t have to worry about what happens to interest rates for a long time, which may be tempting with the Bank of England flirting with the idea of a rate rise.
The disadvantage is that you are tied in to that lender and that interest rate for a much longer period of time.
Decade-long mortgages also tend to have higher rates than shorter-term deals such as two and five-year fixed-rates, as lenders need to factor in longer-term fluctuations in market conditions.
For example, the current average two-year fixed rate is lower at 2.53 per cent.
‘In times of uncertainty, a decade-long fixed mortgage could be a safe-haven for borrowers looking to secure their mortgage payments over the longer-term, said Darren Cook, a finance expert at Moneyfacts.co.uk.
‘As consumers prepare themselves for another potential base rate rise this year, their thoughts will be on how to safeguard themselves from any increase in interest rates.’
The Bank of England hiked rates twice in the past year, from 0.25 per cent to 0.5 per cent in November 2017 and then to 0.75 per cent last summer.
The average 10-year fixed rate is slightly higher than it was in January 2018, when it stood at 3.02 per cent. But at that time, there were only 89 deals on the market.
Moneyfacts also warned that ten-year fixed rate mortgages are often accompanied by hefty redemption penalties, which require a borrower to be tied into the deal for the full length of the term.
However, currently 84 per cent of the 10-year fixed rate deals on the market offer a porting option for those who wish to move home during this period, resuming the mortgage on the same terms with the new property, it added.