Why Locking into a 10-Year Fixed Remortgage May Be a Shrewd Move Now
Home buyers’ incentive to remortgage to a 10-year fixed remortgage product has been boosted by the news, most major lenders increased their Standard Variable Rate (SVR) by 0.25% from September 1.
All customers with the UK’s biggest mortgage lenders have now received the SVR increase. These include Barclays, Halifax, HSBC, Lloyds, Nationwide and NatWest. It’s expected that most other lenders will follow suit.
If you’re a property owner whose mortgage has slipped onto the SVR, then you’ll be facing higher bills. A fixed remortgage – of two, five or 10 years – might well now appeal.
Is it Time for You to Fix?
A sensible alternative is to move to a cheaper fixed-rate deal but how long should you fix for?
In recent years, most home buyers have hedged their options with a two-year fixed deal. But today, the popularity of five- and 10-year fixed remortgages is soaring. With good reason.
The uncertain economic situation ahead, given the Brexit turmoil, has made predicting future interest rate raises complex. Lenders are aware of this. Some are now offering 10-year fixes at historically low rates.
The latest statistics from Moneyfacts.co.uk show that the number of 10-year fixed rate mortgage deals available has skyrocketed in the last year. The average rate available on these products has dropped too.
For some home buyers, of course, fixing until 2028 would not be wise. First-time buyers likely to want to move in the next few years are one example. But for those who are settled and have a decent LTV (loan-to-value), a 10-year remortgage fix could make a lot of sense.
Here’s why.
You’ll Bypass the Extra Remortgaging Fees
Many of the new choice of 10-year products have low or no set-up fees if you have at least 60% LTV (loan-to-value). So you’d save money with one 10-year fixed product by not paying the higher set-up fees that 5 x 2-year fixes would incur.
You’ll Avoid any Jitters over Future Interest Rate Raises
No-one knows exactly what the Bank of England will decide on base rate rises in the coming years. But most experts predict that they will be going up, rather than down. Interest rates are now very low so your locking in now would be well timed. You’ll also have the peace of mind that your mortgage outgoings are set in stone, which will help with monthly budgeting.
You’ll Be shielded from Fluctuations in the Housing Market
You might wonder why this would affect your mortgage costs but it could. If house prices fall, then your potential LTV will increase. That means you may not be offered the best mortgage rates in future. But if the housing market does take a dive, and you’re locked in now, you’ll be unaffected.
You’ll Only Have to Make one Credit Scrutiny
Every time you make a mortgage application, your lender will subject you to its credit checking process. Lenders now need to follow strict suitability guidelines when approving someone for a mortgage. According to a 2016 Which? survey, 7 out of 10 people who either bought or sold a home found it a ‘nerve-wracking’ experience. With a 10-year fix, you’ll only have to go through this process once.
Think a 10-Year Remortgage Fix Might Be for You?
Before you jump, you should always consider the downsides. You should also think through your likely future plans.
- Be aware that you’ll not be able to repay the mortgage in full within the first 10 years without a potentially hefty penalty charge.
- If mortgage rates do fall (a scenario that looks unlikely right now) you won’t be able to lock into a lower rate in future.
But if the moment is right for you to make a long-term commitment to a fixed remortgage – and in terms of the current deal availability and interest rate scenario there are plenty of incentives – now is a good time.
If you’d like advice on finding the right remortgage for your particular situation, we’re happy to help you here.
