Long-term fixed rate mortgages

Whilst there are many positive aspects of longer-term fixed rates; such as improved affordability and stable payments for the borrowers, the downside is hard to get over; being tied into a lender for a decade or more. Most of us are uncomfortable making that long a commitment, with the potential of a few thousand pounds worth of penalty if we want to break out of the deal, so shy away from much longer than a 5-year deal. Some lenders have tried to overcome this, TSB had a 10-year fixed rate with only a 5-year tie-in, Kensington currently has a range of flexible fixed-for-term deals that allow you to avoid an early repayment charge in a lot of situations, but whilst these are great innovations they often then carry a premium price over a 5-year fixed rate that makes them unappealing for most people. There may be a push from various segments of the government that would like to see us adopt longer-term fixed-rate deals, but the British public doesn't seem to share that enthusiasm.

10-year fixes when the market is at a decade-long high for fixes, it's not surprising some lenders are now removing these rates - we would have trouble recommending applicants take such a long-term product in a semi-peak environment. Once the market calms down and we see fixes all in the 3% banding they will start to look like a feasible option.

The risk of a longer-term fixed is a customer may lock into a contract that may become unsuitable. So it is important to understand their longer-term plans and ambitions. What is important is that the mortgage is affordable and fit for purpose. So, for example, offering a first-time buyer enhanced multiples because they need it now, adding a premium to the cost and then only offering them a ten-year product does not seem fit for purpose, or recommending a long-term fixed when a customer is planning on moving in three years. Ten-year rates are solid for customers who, perhaps have a shorter term remaining on their mortgage and may be an older borrower, meaning that a review in a few years may see their options reduced. Or for a borrower who has no intention to move, is on a fixed income and the mortgage payment is affordable. You cannot compare two year fixed rates against ten-year fixed rates directly, it's like comparing apples to oranges.

Long-term fixed-rate mortgages of 10 or more years seem to be popular with first-time buyers particularly. And it's true to say that these products can be helpful for those not used to the costs of home ownership. In essence, this option works to keep costs down and enables people to settle in and get used to managing and maintaining a home.

As for the lending landscape, it looks like the market is ripe with these types of deals. So, with plenty of lenders offering decent length terms, I don't see the need for more of the same.

It's always worth warning clients to be careful if they're thinking along these lines. By having the loan for longer, the amount of interest they have significantly jumps over the course of the loan. I always advise them to think hard about this, and show them figures for shorter terms

Before the base rate increases, the general consensus was to fix in rates for as long as possible. This was right across the board and there weren't many exceptions looking for variable rates or short-term fixes. We have now seen inflation peak which would suggest a softening of interest rates. However, the consumer confidence index is still showing there is confidence in the market. This is despite interest rates being the highest in over ten years and this may dampen the Bank of England's desire to reduce the base rate anytime soon. Options for consumers are not abundant at present and this will continue until the market finds its level.

I can't remember the last time I was asked about a 10-year fixed-term mortgage. While interest rates were low they were attractive for obvious reasons.

Now interest rates are on the rise the majority of people we speak to are under the impression they will come crashing back down so don't like the idea of a 10-year fixed-term mortgage some are reluctant to take a 5-year product.

Long term fixed term mortgages aren't for the faint-hearted with their hefty repayment fees and reduced flexibility. A long-term fixed-rate mortgage could be the perfect choice for somebody with a relatively short mortgage term remaining and who want to ensure their repayments are fixed until the mortgage finishes.

We recently look at a 2, 5 and 10-year fixed-term mortgage with Halifax and there was only 0.10% between the three products. The 10-year option is the most expensive.