Long-Term Fixed Rate Mortgages

My partner and I are looking to buy our first home this year, but we are worried about rising interest rates.  I’ve read that we can take out a long-term fixed rate mortgage that will keep our repayments at a fixed level for anything up to forty years.  Should we go for that?

Diane responds:

Firstly, I can’t give you direct advice without knowing all of your circumstances; I can only share a few thoughts here that might help you understand the factors to consider.

The vast majority of fixed rate mortgages will offer you a rate that is fixed for a relatively short period – up to five years, typically.  However, an increasing number of mortgages with longer possible fixed rates are becoming available.  Ten-year fixed rates are becoming widely available, and a few lenders are coming into the market with whole of term fixed rates, including some offering a 40-year term.  This is normally providing you reach the end of the term before a minimum age set by the provider (typically age 70).

However, using a long-term fixed rate mortgage may not be in your best interests.  The rate that you may obtain today for a long-term deal will almost certainly be higher than for a shorter fixed rate period, and although higher rates look likely in the next few years, they may come down again at some stage in the future.

A higher rate now may also have an impact on the amount you can borrow, under the provider’s affordability checking processes.

Another potential problem may arise if you want to borrow more to move house or carry out home improvements within the mortgage term.  You may find that additional borrowing could be more expensive.  Re-mortgaging later on if your property increases in value could also become more complex, with potential early repayment charges to take into account.

It would be a good idea at this point for you to sit down with an independent mortgage adviser and look at all the options so that you can work out the best route for you both.

Your home may be repossessed if you do not keep up payments on your mortgage.

There will be a fee for the mortgage advice.  The precise amount will depend upon your circumstances, and the type of lending taken.  Smith & Pinching’s minimum advice fee is £950.

Any opinions expressed in this article do not constitute advice.