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Troubleshooter

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  • 21/10/2002
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Are 10-year fixed products worth recomm-ending, or is it best to stick to shorter-term rates?

There is a limited market for 10-year fixed rates as most borrowers focus on the shorter term where two-year fixed rates, without overhanging redemption, are available below 4%.

Either way, borrowers can take advantage of low rates and the ability to make an early switch to another deal when the time is right.

With current interest rate levels it is true to say the total cost over 10 years tends to be lower on the shorter-term deals, although this depends on the rate that will apply from year three onwards.

But there are some who want certainty of payment commitment for the next 10 years because, despite the month-on-month stability of the bank base rate, they are worried rates might jump upwards and cause a return to payment difficulties.

For borrowers in this position, the choice comes down to a balance between rate, redemption terms and the ability to make capital repayments within the term.

For the borrower who wants some long-term certainty, there are now a number of options to choose from, depending on individual priorities.

Stuart Johnson


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