Many lenders now offer borrowers the option of fixing their mortgage rate for the next ten years.
These loans have the most appeal among homeowners who have no plans to move in the foreseeable future.
This is because an expensive prepayment charge will be levied if a landlord has to break the deal, possibly because they want to move.
“Such prepayment charges can often run into the thousands of pounds,” warns David Hollingworth of mortgage broker L&C, “so only take a ten-year solution if it meets your needs and future plans. ”
Virgin Money offers one of the best ten-year fixed rate loans at 1.95% on a home with at least 35% equity.
On a 20-year Â£ 170,000 repayment loan, that would cost Â£ 856 per month. But prepayment charges apply everywhere, starting at eight percent (of the loan) in the first few years, then gradually decreasing to one percent. So a person redeeming the first year would face a fee of Â£ 13,600.
TSB’s approach to ten-year fixed rate loans is more flexible. On loans worth up to 60 percent, its mortgage rate is 2.39 percent, but a prepayment charge only applies for the first five years.
“This loan gives a borrower the option of continuing with the rate or not after five years,” Hollingworth explains. “But the trade-off is that it’s not the lowest ten-year rate.”
Brokers include John Charcol – charcol.co.uk – and landc.co.uk.
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