10-year mortgage fix cheaper than 2-year fix

I would very rarely recommend a 10 year fixed rate deal to a client, as it is a very long period of time to make such a commitment to a mortgage lender. it is almost impossible to predict what your circumstances will look like in 10 years and could lead to high early repayment charges should you need to leave this deal during this fixed deal period. It is important to review exactly what early repayment penalties are involved in a 10 year deal and if you would be comfortable paying this fee should you need to make changes to your mortgage in future years. I can understand why some homeowners would find this tempting especially with the current market, inflation and rising interest rates to provide some long term security. However, the property market is forever changing and you could fix at a higher interest rate than rates that may be available in years to come. It is important to speak to an independent and whole of market mortgage advisor who can review all options with you, to review your current and future plans to determine what the best deal for your circumstances are. Don't be tempted by the idea of long term fixed rate security as this is likely to come back to bite you when your circumstances change in the future.

For us, this is unchartered waters we're sailing into. At the moment there is no hard and fast rule on what type of product they should be taking on their next mortgage. The advice received should be personalised to that client around their plans and aspirations for the future. Naturally more and more people will now be wanting to fix for a long-term duration, for the average person 10 years is an extremely long time to be tied into a mortgage and a lot can change in that period which really needs to be thought about before committing. Others may view this as a short-term squeeze on interest rates where banks are happy to fix clients in long term knowing that if rates come down they will be stuck paying that rate for a long duration or will face hefty early repayment charges to come out early. Naturally, if there is an appetite from customers for a 10 year fixed more and more lenders will follow to gain a peace of this market share.

"It is unbelievable that you can fix your mortgage for 10 years at a lower rate than you can for 2 years. The downside is that you will face Early Repayment Charges if you want to get out of it during the term. If you are planning on staying in your property for 10 years then it is something you should seriously consider. The other thing to consider is that rates like these imply that Nationwide is expecting rates to be cheaper again in the future, so you could end up paying more over the 10 years. However, if you like security, it is a good deal."

There have, historically, been two issues with 10-year fixed rate mortgages. The first was always their cost, they were priced at a level that looked expensive when compared to a 5-year fixed rate offering. Whilst this has changed recently and the 10-year deals are now carrying less of a premium (if any at all), the second issue still holds - lack of flexibility. Many 10-year fixed rates will also come with pretty hefty Early Repayment Charges (ERC's) for the full 10-year term (there are a few notable exceptions to this). Now whilst many will still allow overpayments and be portable, 10 years is still a long time and it's very rare that the mortgage that's right for you in 2022 will still be the mortgage that's right for you 2032. If I ask you to tell me what you think life will look like in two years' time, you will no doubt have a pretty good idea, even in five years' time you will have a fair idea of how things will go, but over ten years? That really is guess work for many people and saying you need to pay a few thousand pounds to escape the mortgage if you guess wrong, that's not a gamble many people are happy to take.