Skipton Building Society has launched a fee-free seven-year fixed rate mortgage for those with a 10 per cent deposit at a rate of just 2.99 per cent.
The stonkingly low rate is part of a refresh from the lender, which has also sliced rates on its two-year residential tracker mortgages and three-year purchase and remortgage fixes.
The new residential trackers – available for both purchases and remortgages – include a 1.43 per cent rate for those with a 25 per cent deposit or equity and a 1.97 per cent rate for borrowers with a 10 per cent deposit or equity. Both deals are fee-free.
Mortgage rates are unlikely to be as cheap as they are now again in this lifetime
The three-year fixed rate range for purchases and remortgage includes three new products – a 1.57 per cent deal available up to 60 per cent loan-to-value, a 1.64 per cent deal up to 75 per cent LTV – both with £995 fees – and a fee-free 1.89 per cent deal up to 60 per cent LTV.
Purchase products offer a free valuation while remortgage products also include free standard legals.
Should you fix for seven years?
This deal from Skipton is a brilliant rate, especially given that you only need a 10 per cent deposit. Monthly repayments on a £180,000 mortgage over 25 years would be £853.
It’s also worth taking into account the fact that mortgage rates are unlikely to be as cheap as they are now again for some time.
The Bank of England has warned several times that the base rate is likely to rise this year, perhaps more than once.
This will almost certainly cause lenders to pull their cheapest rates from the market, so taking advantage of them while they’re still available could be a good idea.
But seven years is a long time to lock into a mortgage unless you’re sure you won’t need to move house in that time frame.
That said, the deal is portable, so providing you didn’t need to borrow more money to purchase your next home, you might be able to take this deal with you to a new property.
If you need to get out early, it will cost you. Early repayment charges are 7 per cent of the outstanding mortgage balance in the first three years, falling to 6 per cent in year four, 5 per cent in year five, 4 per cent in year six and 3 per cent in the final year.
These are pretty hefty – most ERCs drop to 1 per cent in the final year, so if you do decide to go for this deal, be sure.
This is why two-year deals tend to be the most popular, as they offer certainty with fixed monthly payments but are more flexible as you’re only locked in for two years.
Five-year fixed rates have become increasingly popular in recent years however, as the threat of rising interest rates has become more real.
How does it compare?
Coventry Building Society also offers a 90 per cent LTV seven-year fixed rate but it’s more expensive than the Skipton deal, at 3.05 per cent and there’s a £999 fee to pay.
On a £180,000 mortgage over 25 years, monthly repayments would be £858 on the Coventry deal. It has less hefty early repayment penalties starting at 5 per cent and reducing down to 1 per cent in the final year.
