future predict

Borrowers looking at 10-year fixed mortgages despite rising rates

The latest research from moneyfacts.co.uk shows that the average interest rate on a 10-year fixed mortgage is on the rise. After hitting a record low of 2.96% at the start of February, the average 10-year fixed rate product has since crept back up to 3.05%.

It seems that, as predicted, lenders have begun to adjust their pricing due to funding changes and the speculation of increased interest rates by the Bank of England sooner rather than later.
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However, despite the uncertain market, lenders are remaining competitive, offering a variety of deals to borrowers who might consider a 10-year fixed mortgage. Whilst the average rate stands at 3.05%, Barclays and TSB are offering rates as low as 2.39%, and Nationwide, HSBC and First Direct are all offering competitive deals under 3%, dependent on your circumstances.

Rachel Springall, finance expert at moneyfacts.co.uk, said: “In times of uncertainty, a decade-long fixed mortgage could be a safe-haven for borrowers looking to secure their mortgage payments over the longer-term. As consumers prepare themselves for a potential base rate rise this year, or possibly even multiple ones, their thoughts will be on how to safeguard themselves from an increase in interest rates.”

Long-term commitment

Decade-long mortgages may appeal to those that want longer-term stability and security, but borrowers should think carefully before making such a commitment. The early redemption charges on a 10-year fixed mortgage can be significant, so borrowers need to be pretty certain that their circumstances won’t change. If they did need to change their deal, they could be in for some hefty charges.

Borrowers may be more inclined to opt for a five-year fixed mortgage with cheaper rates and a shorter tie-in period. However, for some, the uncertainty of what interest rates will be like in 5 years’ time might be enough for them to commit to a decade-long fixed term. Whatever the decision, borrowers should remember to work out the true cost before making the commitment to any mortgage deal.

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