The mortgage market over past months has been subject to competition on an unprecedented level, with many brokers predicting it will continue past the forthcoming general election. With lenders now extending their product ranges and giving greater choice to the consumer, it could not be a more exciting time to gain a foothold on the property ladder.
Short term fixed rate mortgages have long been a preferred option favoured by borrowers. However current market conditions have given way to longer-term deals, with a notable rise in the number of ten year fixed rate mortgages being offered by several lenders such as Nationwide, Barclays and Santander.
Research undertaken by Moneyfacts, the comparison site, revealed only eight ten year fixed rate deals were offered in January 2014, but now there is a staggering 77 to choose from, which quite clearly demonstrate just how quickly the sector is growing. The average rate for a ten year deal has also fallen from 4.23% in January 2014 to 4.17% just recently.
| Jan-13 | Jan-14 | Oct-14 | 7-Jan-15 | |
|---|---|---|---|---|
| Number of 10 Year Fixed Rate Deals | 15 | 8 | 22 | 77 |
| Average 10 Year Fixed Rate Mortgage | 4.58% | 4.23% | 4.98% | 4.17% |
Source: Moneyfacts 07.01.15
Lenders now seem to have formed the opinion that many mortgage borrowers are ready for a decade long fixed product. Barclays and Nationwide have recently launched their “lowest-ever” ten year mortgage, with Barclays offering a deal of 2.99% carrying a £999 application fee and Nationwide a deal of 2.94%, also with a £999 fee, reduced to £499 for first time buyers.
Undoubtedly, with interest rates at an all time all low, this is good news for homemovers and first time buyers alike, which allows fixed repayments for a whole decade. This has the benefit of removing any concerns of what was to happen should the Bank of England decide to increase interest rates.
Although, the prospect of being able to fix your payments for a ten year period sounds very appealing, it could of course be argued that much could change within that time frame. For example, a change in your financial circumstances, where you may need to sell your property or you come into an inheritance, allowing you to pay your mortgage off.
It is more likely a ten year mortgage would be better suited towards individuals who are looking to purchase their final property and settle down. This is in stark contrast to the younger generation, who will no doubt relocate as their life circumstances change.
In order to be suitable and have mainstream appeal, a ten year fixed deal needs to cater for changing circumstances and “break clauses” need to become integral part of the product. This will allow the borrower to make overpayments or have that opportunity to pay off their mortgage loan without incurring any penalty.
If you feel a ten year mortgage is worth considering, it is important to check the deal is portable, as you may need move to a larger property or alternatively downsize in the near future. You also do not want to incur the possibility of early redemption charges as these can be quite hefty. The importance of seeking impartial mortgage advice therefore could not be more paramount to ensure such a deal is the right product for you.