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Longer term fixed rates

ended 23. May 2022

With interest rates rising and a growing % of people looking to lock in for longer (5-10 years), are you finding you are having to advise against longer term fixes as it just doesn't sit with a borrower's circumstances? Is there a risk borrowers who aren't taking advice are defaulting to terms that could bite them on the @ss as rate fever and the cost of living crisis lead to emotional decisions? Is ‘term risk’ as dangerous as rate risk (if you end up paying hefty ERCs that negative any savings)? 

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Rob Gill
Managing Director at Altura Mortgage Finance
A common misconception amongst borrowers seeking longer-term fixed rates is that transferring or 'porting' the rate to a new property should they wish to move is a straightforward, almost automatic process. Borrowers fail to realise that any porting application is exactly that, a brand new application that will be fully underwritten at the time of moving, and potentially declined if their circumstances have changed. This could leave them paying substantial penalties or early repayment charges to redeem their loan to seek a new lender, or abandoning their plans to move altogether. This is a risk any good adviser will be on alert for, asking any potential borrower whether they intend to move home in the foreseeable future.