Over the last 3 years, we have seen an increase in the number of long term mortgage deals, especially 10-year fixed-rate deals. Homeowners can now lock into lower interest rate deals for the long term but is now the right time to do so?
The Brexit vote and negotiations, Trump presidency as well as the French and German elections represent an uncertain next few years. Experts recommend locking in for the long term now. Lenders are aware of this need and have added more long term fix options to the market. In 2009, there were just 3 10-year fixed rate deals in the market. Today, they are over 120 in the market with average interest rates falling from 4.2% to 3.2% in that time.
With rates at historical lows, it is best for property owners to take action now to give themselves the buffer of paying as low as 2.59% on their mortgagefor the next 10 years. Even for borrowers looking at seven-year fixes, they can lock in for as low as 2.19%.
Being safe in the knowledge that your mortgage rates will remain the same for the next decade, even if Europe or the world is plunged into financial crisis is an opportunity you shouldn’t pass up. However, it is important to note that there is a premium to pay. Interest rates for such long term deals are around 2.59%. Before you make any kind of financial commitment to your mortgage, be sure to take advantage of online tools like mortgage calculators to gain an insight into potential repayments.
Other important considerations to keep in mind
One of the biggest issues with going the long-term route is that it could be difficult to break away from it if your personal situation changes. Think moving jobs, divorce, redundancy or ill health. Even when you agree to pay off early repayment charges, you could be set back up to £9000 on a £150000 loan, regardless of how much you have already paid off. This is why you should be certain about the early payment charges before you get locked into a long term mortgage deal like this.
Who should use this option?
10-year-lock-ins are best for mature borrowers that are about to remortgage. So if you are still less than 45, you need to keep in mind the fact, that the average person moves up to 8 times before they hit that age bracket. The ideal person to get a long term mortgage deal is someone well above 40, with children of secondary school age and a well-paid job where there is no possibility of moving within that mortgage term.
With so much financial uncertainty apparent across the global economy, there’s many little steps that you can be taking now to secure your own finances. With the global market crash of 2008, a lot of property and savings were thrown into disrepute and people lost thousands of money. Taking these steps to secure your finances will keep your money safe, should the worst happen again.