Should you fix your mortgage for 10 years?

Many homebuyers are eager to lock in their mortgage deal ahead of further interest rate rises, however, is that the best thing? We take a look at the increase in those fixing for the long-term, why it’s happening and whether it’s better.

Should you fix your mortgage for 10 years?

When it comes to managing your household budget, one of the easiest ways to help keep on top of your incomings and outgoings is to fix your mortgage. Provided you’re not planning on changing your circumstances in that time, fixing your mortgage deal can provide some security over how much you’ll repay to your lender over a two, five or in some cases even a 10-year period.

Securing a mortgage for the long haul

Recent data released by Moneyfacts has indicated that decade-long fixed deals have become more popular in recent months. The number of these type of mortgage products in the market increased from 126 in October 2021 to 173 at the start of February this year[1].

There have also been figures to suggest that homeowners are taking advantage of the increase in these deals as the number of borrowers opting for a 10-year fixed arrangement has tripled since December.

Why are people fixing their mortgage?

As we have previously reported, the cost of living is increasing and as a way to control this the Bank of England has increased interest rates. Increasing interest rates is one way the government try to control rising inflation.

The idea is that if interest rates go up, this will increase the cost of borrowing, people will have less money to spend and therefore, in theory, this drives down the cost of goods and services. Having enjoyed record low interest rates of 0.1% since the pandemic began in March 2020[2], the interest rate currently stands at 0.75% after three rises since December 2021.

It looks likely that the Bank Rate will continue to rise this year. Some experts predict that it could reach 1.5% or 2% by the end of 2022[3] in a bid to tackle increasing inflation. Inflation has been predicted to climb to 8% this Spring.

This means that those on tracker or Standard Variable Rate (SVR) products, or whose fixed-term deals are ending this year, could see a rise in their monthly mortgage payments. This may lead to an increase in homeowners wanting to fix their mortgage deal as a way to manage their monthly household budget with costs also increasing elsewhere (such as energy prices). 

In fact, we have already seen the knock-on effect of this as remortgage figures rose in February this year compared to January.  And while it dropped slightly in March, was an increase of remortgages in the pipeline for April[4].

Is a longer-term deal better?

This depends on your circumstances such as if you plan to move or if you know your situation is due to change. While the idea of having a fixed cost for a period as long 10 years may appeal to some, it’s worth considering that you may miss out on cheaper deals if interest rates come down in this time. Fixed deals as long as a decade may also come with harsh Early Repayment Charges.

Of the rise in those fixing for longer, B Mortgage Services Adviser Mark Walker said:

I think It’s understandable more people are considering fixing their mortgage for a longer period than perhaps we have seen over the past decade with recent increases and potential future increases to the Bank of England base rate and the climb in inflation being a driving factor.”

Remortgaging this year? Looking for a new deal? Our Advisers can help. Get in touch today to see what they could do for you.

Brunsdon Financial is not responsible for the content of third-party web sites.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Source 1, Source 2, Source 3, Source 4

Subscribe to our emails

Please enter a valid email address.
You need to agree with the terms to proceed

Share this

Should you fix your mortgage for 10 years?

Should you fix your mortgage for 10 years?

Many homebuyers are eager to lock in their mortgage deal ahead of further interest rate rises, however, is that the best thing? We take a look at the increase in those fixing for the long-term, why it’s happening and whether it’s better.

When it comes to managing your household budget, one of the easiest ways to help keep on top of your incomings and outgoings is to fix your mortgage. Provided you’re not planning on changing your circumstances in that time, fixing your mortgage deal can provide some security over how much you’ll repay to your lender over a two, five or in some cases even a 10-year period.

Securing a mortgage for the long haul

Recent data released by Moneyfacts has indicated that decade-long fixed deals have become more popular in recent months. The number of these type of mortgage products in the market increased from 126 in October 2021 to 173 at the start of February this year[1].

There have also been figures to suggest that homeowners are taking advantage of the increase in these deals as the number of borrowers opting for a 10-year fixed arrangement has tripled since December.

Why are people fixing their mortgage?

As we have previously reported, the cost of living is increasing and as a way to control this the Bank of England has increased interest rates. Increasing interest rates is one way the government try to control rising inflation.

The idea is that if interest rates go up, this will increase the cost of borrowing, people will have less money to spend and therefore, in theory, this drives down the cost of goods and services. Having enjoyed record low interest rates of 0.1% since the pandemic began in March 2020[2], the interest rate currently stands at 0.75% after three rises since December 2021.

It looks likely that the Bank Rate will continue to rise this year. Some experts predict that it could reach 1.5% or 2% by the end of 2022[3] in a bid to tackle increasing inflation. Inflation has been predicted to climb to 8% this Spring.

This means that those on tracker or Standard Variable Rate (SVR) products, or whose fixed-term deals are ending this year, could see a rise in their monthly mortgage payments. This may lead to an increase in homeowners wanting to fix their mortgage deal as a way to manage their monthly household budget with costs also increasing elsewhere (such as energy prices). 

In fact, we have already seen the knock-on effect of this as remortgage figures rose in February this year compared to January.  And while it dropped slightly in March, was an increase of remortgages in the pipeline for April[4].

Is a longer-term deal better?

This depends on your circumstances such as if you plan to move or if you know your situation is due to change. While the idea of having a fixed cost for a period as long 10 years may appeal to some, it’s worth considering that you may miss out on cheaper deals if interest rates come down in this time. Fixed deals as long as a decade may also come with harsh Early Repayment Charges.

Of the rise in those fixing for longer, B Mortgage Services Adviser Mark Walker said:

I think It’s understandable more people are considering fixing their mortgage for a longer period than perhaps we have seen over the past decade with recent increases and potential future increases to the Bank of England base rate and the climb in inflation being a driving factor.”

Remortgaging this year? Looking for a new deal? Our Advisers can help. Get in touch today to see what they could do for you.

Brunsdon Financial is not responsible for the content of third-party web sites.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Source 1, Source 2, Source 3, Source 4

Menu