Adam Nanson from Your Mortgage Expert provides July’s Mortgage Market News: Latest figures show that the number of people fixing their mortgages for longer periods is soaring. Here, Adam discusses the benefits and downsides of fixing your rate for longer periods:
“Since December, the Bank of England has increased the base rate five times in a row. The base rate is at 1.25% after the Bank of England voted to increase it again on 16th June up from 1%. The aim of rising interest rates is to cool rising inflation.
“The base rate sets the level of interest that the commercial banks charge us on mortgages. A higher interest rate means that the amount you pay on a new mortgage deal will increase. As a result, more of our clients are speaking to us about fixing their mortgages for longer periods in order to protect themselves from future rises.
Advantages of a long term fixed rate
“You can fix your mortgage for 2 years up to 10 years. The main advantage of a long-term fixed-rate mortgage is that you’ll know exactly what you will pay every month for your mortgage for a set period. So, if you fix for 10 years, your mortgage payments won’t change regardless of whether the base rate rises or falls. Many of my clients like the peace of mind this gives to them and also helps with their budgeting.
“There can also be costs associated with remortgaging. Such costs include legal fees, valuation fees and arrangement fees. So committing to a longer term deal could mean you benefit from not paying these fees every two years of so.”
Disadvantages of a long term fixed rate
“In order to fix for a longer period such as 10 years, you have to fairly confident your circumstances aren’t going to change. Your lender will charge you an early repayment charge if you need to exit your mortgage early. So, if your circumstances change and you can no longer afford your mortgage or if you decide or need to move house, your lender will charge you to exit your mortgage early. The early repayment charge could be several thousands of pounds.
“We therefore always advise clients to look at how much the early repayment charges are. And also to check whether their mortgage is “portable”. So whether you can take it with you to a different house.
“Added to this, longer term fixed rate deals generally are more expensive than shorter term deals. Choosing a seven or ten-year fix means you’ll generally pay a premium for the peace of mind of a long-term deal. It also means you could also end up paying more than you need to if interest rates were to fall again.
“If you are looking to fix your deal for a longer period of time, we would advise you to seek advice from an impartial mortgage broker. We will take the time to review your circumstances, look at all the mortgage products available to you and we will also provide you with extensive calculation as to how much each option will cost and illustrations of how much you could save.”
If you have read July’s mortgage market update and are interested in having a no obligation chat about your mortgage, why not get in touch? We don’t charge anything up front, so by speaking to us, you are under no obligation. We are based in Salisbury, Wiltshire, but we can help you no matter where you live in the UK.
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Max and Martha, First Time Buyer customers from Cardiff
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Andrew and Helen, Armed Forces Mortgage Customers from Salisbury
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Fiona and Graham, Armed Forces Mortgage Customers from Wilton
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Andrea, Contractor Mortgage Customer from Warminster
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Matt, Contractor Mortgage Customer from Southampton
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Hannah and Steve, Protection Insurance Customers from Stamford
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Mike and Bethan, First Time Buyer Mortgage Customers from London
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