Borrowers looking to budget for the long-term are set to benefit thanks to a price war over mortgage deals fixed for a decade.
Santander has led the way with the cheapest-ever ten-year mortgage. The rate is 3.44 per cent on a 40 per cent deposit. Fees are £995.
The next best deal this length is from Woolwich with interest of 3.45 per cent and £999 fees. For those with a 30 per cent deposit, Nationwide has a 3.49 per cent ten-year fix with £999 fees.
For the offering from Santander, monthly payments on a £150,000 mortgage would be £746.12. The total cost of the deal is £90,529.
As a further bonus, borrowers with a Santander 123 Current Account get 1 per cent cashback on mortgage payments of up to £1,000 a month, which would mean cash back over the ten years of £905.29.
Longer-term deals are the latest trend in mortgages. With the Bank of England base rate at a record low, many borrowers want to lock in before any increases in 2015.
Sylvia Waycot, editor at Moneyfacts, says: ‘Constant talk of a base-rate rise is making many borrowers jumpy as the prospect of increased monthly mortgage payments loom.
‘Bearing in mind interest rates are unlikely to fall, borrowers are potentially locking into the cheapest deals they can get.’
The number of ten-year deals has increased fourfold over the past year — from just 12 to 52 available today. And as banks fight for business, rates have continued to fall.
But those holding out for the chance of a further drop could be disappointed.
David Hollingworth, at mortgage broker London & Country, said: ‘Rates could go very slightly lower — but no one should expect ten-year deals to fall through the floor.’
Not all providers are offering longer deals, but many are realising their popularity.
Richard Napier, at Nationwide, says: ‘We have seen significant numbers of customers favouring longer-term fixed-rate mortgages this year. In September, almost a quarter of new deals were five-year fixes.’
Some providers are offering a halfway house instead. Skipton building society has a seven-year deal. The interest rate is 3.49 per cent with fees of £995 for those with a 40 per cent deposit.
But long-term fixes are not perfect for everyone. Homeowners who move could be penalised by early repayment charges.
At Nationwide, overpayments on a ten-year fixed deal are charged at 7 per cent for the first four years, then fall 1 per cent every year after that.
At Santander, the penalty is 6 per cent, regardless of when you have to repay the loan.
Ms Waycot says: ‘It is important to make sure that the deal is portable. You may, over time, need to move to a bigger or smaller home and you won’t want to incur early redemption fees.’
The deals are useful for those in the final years of a mortgage who do not plan to move.
For borrowers not willing to lock in for so long, there are low-cost five-year deals, too.
HSBC, has a five-year fixed rate mortgage at 2.48 per cent for a 40 per cent deposit. Monthly repayments on £150,000 are £671, fee is £999.
For two-year deals, Yorkshire and Chelsea building societies have fixed rates of 1.39 per cent and 1.38 per cent respectively on a 35 per cent deposit. Monthly repayments are £592 and £591.
Sam: 22nd Dec 2014 15:09:00
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