Which sort of client benefits most from a long-term fix?

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Guide to recommending long-term fixed rates

Which sort of client benefits most from a long-term fix?

There are a range of circumstances that vary from client to client when it comes to mortgages but there are some people for whom a 10-year fix might be appropriate.

It is true that people who are concerned about sharp interest rate rises in the future cut across the spectrum of borrowers, and therefore brokers are likely to face questions about the suitability of long-term mortgage fixes from a range of clients - from older single borrowers to young couples and first-time buyers.

But before one makes any decision, there are important considerations to make, as a spokesperson for Halifax outlines: "Those considering taking a longer-term fixed-rate product should always consider whether they are likely to make any significant changes to their circumstances over the next few years."

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Such changes include: 

  • Upsizing.
  • Downsizing.
  • Moving home.
  • Paying off the mortgage early.
  • Changes in employment.
  • Starting a family.

Jaedon Green, director of product and distribution for Leeds Building Society, states: "The key benefit of a fixed rate is certainty of payments and the ability to budget. 

"If these are important and fit with their plans, then a fixed rate could benefit some borrowers in all segments of the market."

But are there some people for whom this might be less appropriate than for others?

Family matters

According to Mark Harris, chief executive of broker SPF Private Clients, getting a long-term fix of 10 years or more is less likely to be a suitable mortgage option for a first-time buyer, than it would be for a family that is remortgaging.

He explains: "A 10-year fix might be a good idea for a settled couple with a young family who have just moved to a bigger house, say with three or four bedrooms.

"They are unlikely to move in the next few years as they already have enough space, but they would like help with budgeting and knowing what their mortgage payments will be each month."

Knowing for sure what sort of monthly outgoings one can expect over the next five, seven or 10 years is a strong argument for cash-strapped families deciding to fix for the longer-term.

John Eastgate, sales and marketing director for OneSavings Bank, says families would "welcome the opportunity to budget" for this period of time, if they are aiming to protect themselves against life events, such as saving for education fees or planning to expand their family.

Jeremy Duncombe, currently director of the Legal & General Mortgage Club, agrees: "A family that has no intention of moving in the short-term may be happier with the certainty that comes with a longer-term fixed-rate product, particularly with the prospect of further rate rises affecting their potentially stretched personal finances."

First-time buyers

While it might seem attractive to people starting out as a homeowner to fix for the longer term, particularly with low wage growth and uncertainty about the direction of interest rates, locking in for a long period of time might not be appropriate for first-time buyers.