Should you fix your mortgage for 10 years?

In some countries borrowers can fix their mortgages for up to 40 years. Now, the Bank of England has indicated it wants UK borrowers to follow their example.

Richard Sharp, an external member of the Bank’s Financial Policy Committee, said: “Certainly, the structure of the UK would have lower risk associated with the housing market if more mortgages were fixed, and fixed for longer.”

However, while long-term fixed rate mortgages have been a popular choice in countries like the US, Denmark and France, they haven’t been such a success in Britain.

In 2007, Nationwide and Halifax had 25-year fixed rates available for 6.39%. More recently, in August 2012 Manchester Building Society had a similar offer for 5.24%. However, these unique deals quickly disappeared and not due to demand.

But should we be rethinking our attitude to long-term deals?

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What’s on offer in the UK?

According to financial information website Moneyfacts, ten-year deals are the longest fixes currently available to UK borrowers and there are only 20 of them available today.

That makes them pretty rare compared to shorter five-year fixes of which there are 594 and two-year fixes, with 1,203 in total on offer.

The latest lender to launch a ten-year fixed rate is Leeds Building Society. The deal is available on a 65% loan-to-value with a rate of 4.49% and a £199 fee.

This new offer joins two other decade-long deals from the building society.

Leeds also has a 4.49% rate on a 75% LTV that comes with a £1,999 fee and a 4.59% rate on an 80% LTV that attracts a £999 fee.

However, the best ten-year fixed rate available comes from Norwich and Peterborough Building Society. On a 75% LTV the lender is offering a rate of just 3.84% fee-free.

But should we be rushing into these long-term deals?

[Compare the top rates on fixed rate mortgages]

Why you should fix for a decade

There are plenty of good reasons to go for a ten-year fix.

For a start you’ll get long-term peace of mind that a variable rate or shorter fix can’t provide. With the 3.84% rate from N&P, on a £150,000 repayment mortgage taken out over 25 years, you would have to pay £779 a month for a decade. Knowing that what you’ll pay each month will remain constant is not only reassuring, but is also helpful for budgeting and financial planning.

Going for a ten-year deal will also save you on the cost of remortgaging. With a shorter two-year deal you might need to remortgage five times over ten years and that means stumping up the fees associated with the process five times too.

Another reason you might want to go for a decade long deal is to lock into the record low mortgage rates available now.

Thanks to a record low base rate, which has remained at 0.5% since March 2009, and the Funding for Lending Scheme, which has provided £80 billion of cheap funds to encourage banks and building societies to lend, mortgage rates have been driven down to historic lows.

But the Funding for Lending Scheme for mortgages has now ended, meaning rates are likely to start creeping higher. Add to that the likelihood of base rate increasing over the next couple of years and locking in seems an attractive move.

Why you shouldn’t fix for a decade

However, there are also good reasons why you shouldn’t go for a ten-year fix.

The main one is that most tend to come with pretty harsh early repayment charges (ERCs). These are penalties you need to pay if you overpay your mortgage by too much, switch to another provider during the term of your deal or choose to pay your mortgage back early. With the N&P deal you will have to pay a whopping 7% on the outstanding balance in the first three years of the deal.

ERCs can be especially punishing if you want to switch onto a new deal that might be better for you or if your circumstances change. For example, you might need to move to a bigger house for example as your family expands. However, some lenders may let you ‘port’ a mortgage if you move property and take the mortgage with you, though you’ll need to meet the lender’s criteria at the time.

The other key factor that might deter people from a ten-year fix is the price. Because of the long-term security these deals come at a premium and there are much cheaper mortgages around.

For example a two-year fixed rate on a 75% LTV with West Bromwich Building Society is available for 1.89% with a £999 fee. This deal would give you monthly repayments of £628 a month on a £150,000 repayment mortgage taken out over 25 years.

That’s over £150 a month cheaper than what the comparable ten-year 75% LTV deal from N&P will cost you.

[Compare the top rates on fixed rate mortgages]

Top ten-year fixed rate deals

If you’ve weighed up the pros and cons and have decided you want to lock into today’s rates for as long as possible here are the best deals available right now.

Provider	Deal	Fees	Max LTV	ERCs
Norwich & Peterborough BS	3.84% Fixed for 10 years	£0	75%	First 10 years: 7/7/7/6/5/4/3/3/2/1% on outstanding balance.
Woolwich from Barclays	3.89% Fixed to 31/03/2024	£1499	70%	To 31/3/24: 6/6/6/6/6/6/6/3/3/3% on sum repaid.
Yorkshire BS	3.89% Fixed to 29/02/2024	£130	75%	To 29/2/24: 7/7/7/6/5/4/3/3/2/1% on sum repaid.
Yorkshire BS	4.09% Fixed to 29/02/2024 (offset option)	£130	75%	To 29/2/24: 7/7/7/6/5/4/3/3/2/1% on mortgage advance.
Leeds BS	4.49% Fixed to 30/04/2024	£199	65%	To 30/4/24: 6/6/5/5/5/5/4/4/3/2% on sum repaid.
Leeds BS	4.49% Fixed to 31/03/2024	£1999	75%	To 31/3/24: 6/6/5/5/5/5/4/4/3/2% on sum repaid.
Leeds BS	4.59% Fixed to 31/03/2024	£999	80%	To 31/3/24: 6/6/5/5/5/5/4/4/3/2% on sum repaid.
Britannia	5.49% Fixed to 30/04/2024	£999	75%	To 30/4/24: 6/6/5/5/4/4/3/3/2/2% of outstanding balance.
The Co-operative Bank	5.49% Fixed to 30/04/2024	£999	75%	To 30/4/24: 6/6/5/5/4/4/3/3/2/2% of outstanding balance.
The Co-operative Bank	5.99% Fixed to 30/04/2024	£0	75%	To 30/4/24: 6/6/5/5/4/4/3/3/2/2% of outstanding balance.

Source: Moneyfacts

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This article aims to give information, not advice. Always do your own research and/or seek out advice from a regulated broker, before acting on anything contained in this article.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.