Recent research from the Abbey indicates that one in ten people would choose to fix their mortgage payments for 10 years or longer.
27% of people would choose to fix for 5 years if they were applying for a remortgage.
Choosing a fixed rate mortgage means you know exactly what your mortgage payments will be for a specified length of time. Longer term fixed rate mortgages are growing in popularity as people seek security from interest rate fluctuations.
However, fix your mortgage at the wrong time and you could regret it. The fixed rate interest rate you choose is unaffected by changes in the mortgage base rate. So if bases rates fall significantly you will be out of pocket. Borrowers should understand what they are signing up for and the consequences if base rates change.
Longer term fixed rates also come with redemption fees or early repayment charges (ERC). ERC’s are payable if you reduce or pay off your mortgage during the ERC period. Not all mortgages are portable so ERC’s could even be payable if you move house, so check carefully when arranging your mortgage.
Longer term fixed rates may seem attractive but may not fit with your plans to move or pay off your mortgage. Always seek advice from a mortgage broker to ensure your fixed rate mortgage is suitable for your circumstances.