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Guide to Long-Term Fix MortgagesWho should opt for long-term fixed rates?
Anyone who is thinking they have 10 years plus on their mortgage, know they are not going anywhere, and perhaps have children who have already flown the nest should contemplate these deals, according to David Hollingworth, associate director of London & Country Mortgages.
Mr Hollingworth says: “They can just get their head down, pay it off over the remaining 10 years of the mortgage, safe in the knowledge that your payments are not going to rise no matter what happens with interest rates.”
Mr Hollingworth states that it is for everyone to figure out the value of long-term stability versus that lock-in period and the associated early repayment charges if they want out.
However, he points to the fact that take-up has remained low and argues this is because borrowers are reluctant to pay a higher rate at the outset compared to shorter-term fixes, especially in the current ultra-low interest rate environment.
He adds: “Tying in for 10-years just seems too permanent a fixture for some.”
Those who either think interest rates are near the floor or simply value the security of long-term fixed monthly payments - even if an alternative mortgage might be expected to work out cheaper - should also consider long-term deals, says Ray Boulger, senior technical manager of John Charcol.
Phil Cliff, director of mortgages for Santander for Intermediaries, says what is vital to any borrower contemplating this deal is that an adviser understands and explains the consequences of locking in to a fixed rate for this period.
Borrowers such as first-time buyers who may require greater flexibility might be better looking at shorter-term options, he notes, though he says that even for first-timers long-term fixed rates should not be ruled out as they could still be appropriate.
Research undertaken by YouGov, on behalf of the Council of Mortgage Lenders back in November 2007 revealed where individuals did favour fixed-rate mortgages the strongest single preference was for short-term deals of between two and five years.
However, the YouGov results suggested reasonably strong prospective interest in medium or longer-term deals, with 43 per cent of all respondents and 34 per cent of existing borrowers saying they would consider long fixed rates.
Most people who would contemplate a long-term fixed rate mortgage told YouGov they were interested in peace of mind in case interest rates go up (37 per cent) and helping people to manage household budgets (35 per cent). Providing certainty also featured prominently in the reasons why people would contemplate such a deal (27 per cent).
