Fixing for the long haul

Many borrowers will grapple with the question of whether they should switch their mortgage to a fixed rate this year.  With talk of base rate rising sooner rather than later, those that have been enjoying low variable rates will have to make a call as to whether they should fix and protect against increasing rates.

Those that decide to fix then have to decide how long they should lock in for.  The shorter the fixed rate period the lower the rate is likely to be and a 2 year fixed rate could be 1.5% lower than a 5 year fix.  However, with base rate at an historic low there is an argument that borrowers should look to fix longer term so that their protection doesn’t cease just as rates really start to climb.

Some rates give the option to fix for even longer than the medium term.  It could sound ideal to lock in for the long term whilst rates are low but what are the potential downsides?

The available mortgage rates are higher again, which can put some borrowers off even though they could well look like good value in years to come.

Another big consideration is whether they may need to review their mortgage at some point, as fixed rates will usually carry an early repayment charge during the fixed rate period.  Whilst many will feel comfortable in foreseeing any potential need to review their mortgage in the medium term, ten years is a long time to lock in.

The mortgage can usually be taken to a new property but there’s no guarantee that the lender will be able to offer any increased level of borrowing if required.  That could mean having to stump up the early repayment charge in order to achieve the new mortgage and limits the flexibility at that time.

Long term fixed rates can work well for those that simply want to know where they stand and will have no need to rethink their mortgage, for example where they simply want to see out the remaining ten years of their mortgage.

Although there used to be plenty of deals available to those seeking a long term fix, only a couple of lenders currently offer ten year deals and I’d expect that most borrowers will limit their search to the more popular 3 to 5 year fixed rates.

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