While deals available have increased from 55 in November 2014 to the current figure of 108, interest rates being offered have fallen from 4.45% to 3.54% in the same time period.
But while a doubling in deals available may indicate a fast growth in the market, this type of product is “not very common”, said Simon Collins (pictured), product technical manager at John Charcol. “Not many lenders offer them and many brokers probably would not be selling them.”
Though they are not a commodity, there are benefits to choosing ten-year fixed rate mortgages. Charlotte Nelson, finance expert at Moneyfacts.co.uk said: “Locking into a decade-long deal now will allow borrowers to rest assured that their monthly repayments will not go up until at least 2025, which could be seen as a wise move when base rate picks up from its historic low and mortgage rates follow suit, particularly as the average 10-year rate stands at just 3.54% today.”
While some borrowers may choose ten-year mortgages for the security of a fixed rate, Collins said it is a ‘horses for courses’ type of product that could be good for people buying their last mortgage or families who are not intending on moving.
“Borrowers must also bear in mind that most ten-year mortgages require them to be tied to the deal for the full term, so it is vital that they weigh up whether they will need extra flexibility, such as being able to transfer the mortgage to another home. Failing to do so could mean borrowers end up paying a hefty early redemption penalty”, said Nelson.
Restrictive penalties could turn borrowers off ten-year fixed rate mortgages, Simon Collins warned, adding: “TSB offers a deal with penalties only in the first five years. It is a bit more forward thinking. The rate is slightly higher, but you are paying for the premium of the flexibility.”
One of the benefits of a ten-year fixed rate mortgage, Collins said, is that most lenders allow repayment of up to 10% of the balance fee-free, meaning the borrower has the potential to pay off their loan more quickly: “Having the payment security means you can put any spare cash towards your loan.”
While there are several benefits to choosing this type of product, Charlotte Nelson said that though it is known that the base rate will eventually rise, it is unknown when or by how much, making a 10-year-deal a “gamble.”
Simon Collins agreed, saying while fixed term rates can be the better deal as standard variable rates might have gone up, it is “a guessing game.”
