Could fixing for a decade become the norm for remortgaging?
• 60% of homeowners weren’t aware that it was possible to choose a ten-year fixed-rate mortgage
• More than a third of borrowers would consider fixing their mortgage for ten years
• 68% feel that fixing their mortgage for ten years would give them financial peace of mind
Latest consumer research* from Mortgage Advice Bureau highlights the increasing number of homeowners opting for a ten-year fixed-rate mortgage in the pursuit of longer term financial security.
In the recent poll, over a third of homeowners with a mortgage said they would consider fixing their mortgage for a decade, with the top reasons to fix for longer including the peace of mind gained by knowing what their monthly expenditure would be (68%) and a belief that interest rates will go up, a view shared by over half (56%) of those surveyed.
Brian Murphy, Head of Lending for Mortgage Advice Bureau comments on the findings of the survey, “The number of customers who would consider taking a ten-year fixed-rate deal comes as no surprise, as we’ve seen an increase in the number of lenders bringing new products to market over recent years. Borrowers clearly want to know that they are making a sensible financial decision and that they are safeguarding themselves against potential financial risks such as interest rate changes. Knowing exactly how much your mortgage repayments are going to be for the next decade offers obvious reassurance for consumers, regardless of what happens to the Bank of England base rate, which, as we are already aware, is almost certain to increase at some point this year.”
Brian continues, “Decade-long fixed rates have been available for some time, however there is a lack of consumer awareness of them, as the results of the research suggest. But once potential borrowers discover that this type of product is available, the appeal for some is easy to understand. That’s because the security of a ten-year deal will see certain types of borrowers through to a significant point in their lives, such as perhaps seeing children off to university or reaching retirement age. Alternatively, some borrowers may find that ten years is the length of time they have left on their mortgage, and therefore fixing for the remainder of the term provides an inevitable amount of reassurance.”
But are ten-year deals right for everyone? Brian cautions, “However, for other borrowers, fixing for a decade may not provide the flexibility they need in the shorter term, for example, if they need to move home within the next few years, in which case a ten-year fix may not be right for them. It’s always worth bearing in mind that the majority of fixed-rate deals have significant Early Repayment Charges (ERCs) associated with them, so it’s worth checking the small print and doing your sums to decide what works best for your own circumstances.”
“That aside, what is encouraging to see is that there is an increasing level of prudence and consideration being applied to what is for many their biggest financial commitment. That ten-year fixed-rate products are rising in popularity demonstrates a level of responsibility in the advice being offered to consumers and, in turn, their attitudes toward mortgage debt.”
Because we play by the book we want to tell you that…
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.