According to Moneyfacts.co.uk, there are now 157 options for 10-year fixed rate mortgages. The average rate charged on a 10-year fixed mortgage stands at 3.01 per cent, a fall of 0.09 per cent year-on-year from the 3.10 per cent recorded in August 2018.
One of the latest lenders to enter the market is Newcastle Building Society, which launched two of these products today, one available at 80 per cent loan-to-value and one at 90 per cent loan-to-value, charging 2.85 per cent and 2.89 per cent respectively. Borrowers are also able to repay their mortgage after five years without penalty.
10-year fixed rate mortgage market analysis
|Average mortgage rate||5.09 per cent||3.23 per cent||3.10 per cent||3.01 per cent|
|Number of mortgages available||22||80||139||157|
Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Borrowers may well be thinking of different ways to safeguard themselves from potential rate fluctuations in the market, or even for some peace of mind during a period of economic uncertainty.
“A decade-long fixed rate mortgage is no doubt a big commitment, so borrowers must feel confident that their circumstances are unlikely to change to avoid the expense of refinancing earlier than expected. There is a much larger choice of mortgages within the five-year fixed market and these should ideally be considered as an alternative.”
Bob Steel, mortgage and protection sales coach at First Mortgage, added: “In general terms, just under one per cent of our clients take a 10–year fixed rate. Although we have seen a slight increase in the demand for a 10–year rate since the vote to leave the EU, this is usually for a very specific type of client – i.e. nearing retirement and 10 years or slightly more left on mortgage with absolutely no plans on moving.
Steel went on to say he couldn’t “see the appeal of recommending a client to lock into a product with fairly hefty exit penalties.” He said: “Whilst the market is moving towards longer term deals to take advantage of low long-term rates, I think the lenders need to make the exit penalties less excessive.
Dev Khosla, spokesman at Made Mortgages added: “It shows that people are uncertain about what’s going to happen in the future. Bearing in mind the Brexit scenario and the international credit market, people want to take a longer-term view rather than a shorter-term view on not knowing what’s going to happen in the UK property market.”
He continued to say portfolio landlords and buy-to-let professionals were also a little uncertain, so they were “taking the longer-term view that things may not go their way.”
On the other hand, Paul Flavin, managing director of Zing Mortgages, believed it showed “confidence in the money market” that in the short to medium term the economy was going to be “pretty good”. He said: “I think because they know the Bank of England will hold the rates no matter what happens. I think in general it’s confidence in the market.
“Spot rates are low so the rates can be passed on.”
Nicola Arbon, managing director of the Mortgage Hut said she had seen a “slight demand” in people going for 10-year options but made sure to always advise her clients to “proceed with caution” in case their circumstances changed and they were left with a “hefty” early repayment charge. “With interest rates being as low as they are people are wanting to lock it in for as long as they can. The uncertainty that Brexit brings, people want to know their payments are not going to go sky high.”
Furthermore, Keith Brain, company director of Rivington Mortgages, said in his experience it was clients in the 40s and 50s who remembered the high interest rates of the 1980s and early 1990s who had changed mortgages a number of times that were going for 10-year fixed mortgages.
He said: “It’s coming to the stage where this is probably the last time they’ll change mortgage. If you’ve got a 12- or 13-year term and we fix to 10 years and make a slight over payment, it incentivises them to get the mortgage paid off in 10 years.”
Norman Philips, director of Drake Mortgages, added: “I am surprised that 10-year fixed rates are popular. In the modern world, you have to balance the certainty of a mortgage payment with lack of job security; and then include the knowledge of early repayment charges plus an understanding of the way that underwriting works on portability.”