Following on from a deal that the Norwich and Peterborough Building Society launched last year, which it had to withdraw after only two weeks due the huge demand for it, a number of leading lenders are again looking at long-term mortgage products.
These so-called ‘fix and forget’ mortgages will be set around the four per cent mark so would not be up for renewal until around 2023. With the interest in the deal that was released last year industry experts are warning that applicants will again need to speedy in order to get signed up to these new deals.
Why would I fix for such a long time?
Well there is the obvious security of knowing exactly how much you need to pay each month over a long time frame, especially with current low interest rates. Many industry experts believe that this is the perfect time to secure a 10 year deal. Rates are unlikely to drop significantly lower and there will probably only be a few of these deals around. There is also the knowledge that you will not need to look at remortgaging for a long time, meaning that you could save thousands on remortgaging costs including application fees, legal fees and valuation costs. With many re-mortgaging products now attracting application fees in excess of £1,000 alone you could be saving yourself a substantial amount of money over the years, money that could be ploughed in pensions or investments.
What are the drawbacks?
There are a few disadvantages that anyone entering into a 10 year fixed rate mortgage should be aware of. One of the most important is to check portability. In other words that your mortgage can be transferred to another property should you want or need to move. Be sure to double check all the small print so that you are clear on your position should your circumstances change.
Also be aware that many of these products may have relatively strict repayment guidelines, allowing you only to over pay by a certain amount before penalties kick in. Investment products and pensions are always a sound move if you do have extra money each month and want to use it productively. There will also be higher charges should you wish to clear the debt, move to a different rate or transfer to another lender.
Who do these deals best suit?
Younger borrowers may find these deals too restrictive for them in that they will want to move prior to the end of the 10 years and may start to incur additional costs. On paper, at least, it seems that the products are best suited to people with around 10 years left on their mortgage and who are relatively settled in their current home and unlikely to move over the term of the agreement.
Your home may be repossessed if you do not keep up repayments on your mortgage