In short – probably not. Lewis Chambers, Director of Mortgages and Finance at Bradley Hall, discusses why borrowers shouldn’t panic.
Despite mortgage rates hitting a historic low and an abundance of fantastic deals on three and five-year fixed rates, Brexit still seems to have encouraged borrowers to enter panic mode. A range of 10 year, and even 15 year, fixed rate mortgages have recently hit the market due to demand – however, is this really the best option for homeowners?
The obvious advantage of taking out such a long-term commitment is that it provides borrowers with peace of mind. It is assumed by many that our economic upheaval will bring changes to interest rates, and to many they are unsure whether rates will increase or decrease accordingly. Contrary to popular belief, evidence from economists suggests that there is no indication that the Bank of England would increase its interest rates this year – meaning that mortgage rates are unlikely to become out of control within the near future.
The same thought process has also contributed towards the decline in tracker rate mortgages, which now only account for less than 5% of residential mortgages. One in ten of these are also confined by a collared rate – which means the interest fluctuations are limited and the borrower may not benefit from any decreases.
Choosing one of the 157 10-year fixed rate mortgages which are now available may seem like it will provide security, however, it could provide to be a costly exercise. If your circumstances change and you decide to move or sell up, you could be faced with a substantial Early Repayment Charges (ERC) or porting fees, which may well equate to thousands of pounds. Virgin’s new range of long-term mortgages has an ERC as high as 8% in the first five years which, based on the average UK house price of £229,431 could mean an extortionate charge of £18,354.48.
Interest rates on a 10-year fixed mortgage currently stand at an average of 3.01 per cent, whereas buyers could benefit from as low as 1.72 per cent on a five-year fixed rate. This option has been by far the most popular, with many banks offering a number of options to suit individual borrowers. The total has reached almost 2,400 loan types – meaning lenders must create attractive deals to stand out from the rest.
If you are looking for your first home, looking to move or remortgage please contact our specialist mortgage team https://www.bradleyhall.co.uk/contact-us/