10-year fixed mortgages expected to grow in popularity
Longer term fixed-rate mortgages are expected to grow in popularity, after the Bank of England (BoE) moved to increase interest rates last week and indicated that further rate rises were on the horizon.
On Thursday 2 August 2018, the Bank increased its base rate from 0.5 per cent to 0.75 per cent.
Mortgaged homeowners who are on their lender’s standard variable rate (SVR) – which follows fluctuations in the BoE’s base rate – are likely to see their monthly payments rise over the next few weeks, as high street banks move to pass on the changes.
However, those who are on a fixed-rate deal will be protected from the interest rate increase – as well as any future increases – until their fixed-rate period ends.
For many months now, rumours have been growing that the BoE intends to gradually increase its base rate over the course of this year or next.
In light of the rumours, many high street lenders have begun offering attractive five or 10-year fixed-rate deals to lure in homeowners who wish to secure a cheap rate for a long period of time.
The general consensus among property experts and commentators is that these deals are likely to grow in popularity over the course of 2018.
However, Peter Gettins, of broker London & Country, said that homebuyers and homeowners needed to think carefully before signing up to longer term deals, and consider what kind of mortgage best suits their unique circumstances.
“People need to look at where they are in their lives and what they can see for the foreseeable future and decide what level of security they want,” he said.
“It comes down to how much you value that additional level of security that paying a bit more for a 10-year fix would give you,” he added.