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Would you fix your mortgage for 10 years?

Would you fix your mortgage for 10 years?

Category: Mortgages

Updated: 07/07/2016
First Published: 07/07/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

We all like to have a bit of stability when it comes to our outgoings, and having a fixed rate mortgage can be a great way to achieve that. You can be safe in the knowledge that your repayments won't change for the duration of the term, regardless of what happens to mortgage rates and the wider market in that time, which can be a great help for those who like to be in complete control of their budgets. But would you fix your mortgage for 10 years? According to research from HSBC, many people would.

Financial certainty

The survey found that 72% of respondents would consider fixing their mortgage for 10 years as a way of providing a measure of financial certainty, highlighting the level of demand that such mortgages are currently enjoying. Indeed, 45% cited the stability and security of knowing how much they have to repay each month as the top reason for considering a 10-year fix, while 34% said they felt uncertain about how mortgage rates may change in the future and a further 41% said it would give them financial peace of mind.

Other reasons for considering such a deal include convenience (26%), ease of budgeting (43%), stress reduction (35%) and having had previous experience of being hit with mortgage rate increases (22%), while some simply wanted to avoid the administration (22%) and others were concerned about recent increases in stamp duty and didn't want to risk mortgage rates going up (11%).

"Ten years may seem like a lifetime away, yet our research shows that we like to plan ahead and are currently looking for security," said Tracie Pearce, HSBC's head of Mortgages in the UK. "Fixing your mortgage rate for the long term offers customers certainty that their mortgage repayments will not increase over that period."

New possibilities

The research was released to coincide with the launch of HSBC's new 10-year fixed rate mortgage, available from today, which has just secured an "outstanding" rating from the Moneyfacts research team thanks to its market-leading rate of 2.79% and complete absence of fees.

However, Coventry Building Society is following hot on its heels and will be launching its own 10-year fixed rate mortgage tomorrow, priced at 2.39%. This deal will come with a £999 fee and will be available at a loan-to-value (LTV) of 50%, making it the top long-term choice for those with plenty of equity in their home.

And this could be just the beginning, as Rachel Springall, finance expert at Moneyfacts, explains: "Decade-long fixed deals were a rarity after the credit cash, but right now there are more deals than ever before with lenders creating a price war in the sector. More lenders are likely to follow suit; with many concentrating on two and five-year fixed deals, a 10-year fix is another area of the market to enter and compete in."

Indeed, the number of deals has spiked over the last 12 months – there were a mere 14 suitable options available a year ago, but now there are a staggering 134 10-year deals on the market, highlighting the rapid growth of this sector.

"These decade-long fixed mortgages are clearly becoming a new favourite among lenders who want to provide borrowers with a long-term option to secure monthly mortgage payments," added Rachel. "This trend may well continue to grow in times of uncertainty."

There's currently a lot of talk about mortgage rates falling as a result of Brexit, but there's no guarantee – and there's certainly no telling how long those lower deals may last for. A 10-year deal, however, offers long-term security, so there's little need to worry about missing the boat and facing higher rates in the years to come.

However, as Rachel points out, borrowers must always work out the true cost of any deal and be sure that their circumstances will remain relatively unchanged for the next 10 years: "These decade-long deals carry early redemption charges, and because most of these run up to the final year of the initial fixed deal, these mortgages may not be appropriate for borrowers who want to move or remortgage in the next few years."

But, if you've considered every option and are confident your circumstances won't change too much in the next decade, a 10-year fix could be a great option. Check out our best buys to get started.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.