10 year fixed mortgages get even cheaper
The battle to offer the cheapest 10-year mortgage has intensified with Nationwide’s 2.84pc deal – the lowest ever seen
Nationwide has ramped up competition in the 10-year fixed-rate mortgage market, with the launch of a 2.84pc deal.
This is the now the cheapest 10-year fix available, following the launch of Barclays’ 2.99pc deal earlier this month, which at the time was the cheapest mortgage ever seen for those who want to fix for a decade.
Nationwide will offer existing mortgage customers the 2.84pc rate, while new customers are offered 2.94pc. The mortgage comes with a £999 product fee, or £499 for first-time buyers, and borrowers will need to have a deposit of at least 40pc.
Remortgage customers will also receive a free standard valuation, and the choice of free standard legal work or £250 cashback.
The number of 10-year fixes on the market has surged over the past year, with 77 products now on the market compared with only eight a year ago, according to financial information website Moneyfacts.
Richard Napier, director of mortgages and savings at Nationwide, said there had been a “growing trend” of customers opting for longer term fixed rates to “ensure certainty of monthly mortgage payments, particularly ahead of any rise in interest rates.”
Around nine in 10 new mortgages being taken out are products with a rate which is fixed in for a certain period of time, protecting borrowers from any immediate impact of the base rate increasing.
Bank Rate will remain on hold until the second half of 2015, according to recent signals from the Bank of England, but a series of developments in the global economy means Bank Rate could stay at 0.5pc for a while longer.
David Hollingworth, spokesman for London and Country mortgage brokers, said that fixed mortgage rates had fallen across the board and the margin between the best five- and 10-year fix has now narrowed to just 0.55pc.
While two and five year fixed-rate mortgages remain popular, borrowers are looking to fix for longer as expectations of a Bank Rate rise are pushed back further. But Mr Hollingworth says that many house buyers are still reluctant to fix until 2025 because of the possibility of having to pay early repayment charges, or moving house and not being able to “port” their mortgage. Telegraph Money has written extensively about home owners being told they cannot port their mortgage to a new property.
Mr Hollingworth said: “The 10-year fixed mortgage market isn’t currently overcrowded, but interest is growing for longer term fixes. While I don’t think rates will go much lower than 2.84pc, we could see more lenders start to cut their rates in-line with Barclays and Nationwide.”
Ray Boulger, of brokerage John Charcol, said: “The further ahead one tries to look the more difficult it is to be confident of where interest rates will be, and so having one’s mortgage fixed at sub 3pc for as long as 10 years provides comfort for a long time, not only for those worried about rate rises but also just in terms of making it so much easier for household budgeting.”
One way of assessing a 10-year-fix is how much higher the rate is than on a comparable five-year fix, Mr Boulger said. Chelsea Building Society has launched a market leading five-year fix at 2.29pc, with a £1,675 fee, for those with a 35pc deposit, and so buyers of the 10-year-fix are paying an extra 0.55pc for five years in exchange for the certainty of a 2.84pc rate in the second five years.
In December, TSB launched a 10-year fix that allows borrowers to switch to a different deal after five years without any penalties.
The 10-year “Fix and Flex” mortgage has a rate of 3.44pc for borrowers with a 40pc deposit. There is no fee and the early repayment charges reduce on a sliding scale from 5pc until April 2016 to 1pc until April 2020. After that there are no charges to refinance or end the mortgage early, according to telegraph.co.uk.