Lender launches UK’s first 15-year fixed-rate mortgage

Residential homeowners and landlords can protect themselves from increasing interest rates for the next 15 years if they secure a mortgage with Virgin Money.

The lender has launched a new range of residential and buy-to-let mortgages enabling borrowers to secure a fixed interest rate for up to 15 years. According to Moneyfacts.co.uk, the last time a 15-year fixed rate deal was available was 2009 when Britannia Building Society offered a rate of 6.49%.

Chris Sykes, mortgage consultant at broker Private Finance, said: “We believe this 15-year fixed rate product is the first of its kind in the UK mortgage market, and the launch demonstrates just how innovative lenders are prepared to be to maintain their competitive edge as the battle for new business intensifies”.

Just 0.26% more than cheapest available 10-year deal

While locking into a long-term fixed-rate mortgage is not suitable for everyone, particularly not those that might want to move within the next 10 to 15 years, they do suit borrowers buying or remortgaging their ‘forever home’. For these borrowers, the good news is that the rates offered by Virgin Money are competitively similar to those currently available for 10-year fixed rate deals, meaning the additional five years’ security comes at little extra cost.

The range for residential borrowers includes a 15-year fixed rate of 2.55% for a £995 product fee for those with a 35% deposit, or a rate of 2.89% fee-free. Those looking for a 90% loan to value (LTV) mortgage can opt for a 3.75% fixed rate without a fee.

Buy-to-let range offers 10-year fixes

Buy-to-let landlords can also benefit from fixed rates of up to 10 years. The new buy-to-let range includes a 10-year fix at 3.99% at 75% LTV with no fee, and at 60% LTV landlords could secure a rate of 2.46% with a £1,995 product fee. The buy-to-let range offers the same benefits as the shorter-term range, permitting overpayments of up to 10% per annum, payment holidays and portability.

Beware hefty early repayment charges

Borrowers that enter into the deal and then decide to get out early should be aware that there is a significant penalty of 8% to pay if they leave within the first five years, e.g. a homeowner that borrowed £200,000 would be looking at paying an early repayment fee of £16,000. Young families planning on expanding would, for example, be better off opting for a shorter-term fixed-rate, with a lower interest rate and the flexibility to move property without facing hefty early repayment charges.

Andrew Asaam, director of mortgages at Virgin Money, said: “Fixed rates of longer than 10 years are not generally available in the UK market but, given the economic backdrop, they can be a perfect choice for borrowers who are looking for longer interest rate certainty.

“We are delighted to continue our tradition of innovation by adding them to our range, giving customers the option to take advantage and lock in the low rate environment for an extended period.

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