A 10 year fixed rate mortgage is simply a loan on a home that has the same rate for 10 years no matter what happens to either the Bank of England base rate or the standard variable rates that lenders offer. The interest rates for these types of mortgages are often slightly higher than the SVR if rates look to be rising in the longer term and lower if the outlook is for lower interest rates.
The main advantage of course is that you know exactly what your mortgage repayments are going to be for the next 10 years and if you are able to find some of the best deals whilst mortgage interest rates are low then as they rise you'll be able to sit back and enjoy the savings. Once the fixed period has ended then you'll most likely be placed back onto the lenders standard variable rate of interest at the prevailing rate in 10 years time.
Of course, the disadvantage with this method is that there are likely to be high exit penalties even if you want to move home or decide you want to go onto another rate. Some lenders have very high penalties in the first 2 or 3 years and then others for the remainder of the term. However, if you believe you won't need to change your deal for those 10 years then this may be good for your circumstances but it's worth thinking long and hard as 10 years is a long time to be tied into the contract.
There are not many lenders who are offering 10 year fixed deals at present because the next rate rise only has to be upwards so the risk of offering such a deal by the banks and building societies is still quite high. However there are some lenders that have products in the market place as follows:
The loan to value percentages for these deals is still low at between 60% and 70% but the overall rates can be around 5% interest for the whole term. Watch out for any arrangement fees as these can be at £1,000 or more. Plus as mentioned above it's worth looking at the small print for exit penalties for remortgaging during the term or switching to another product.
At present there are not many 10 year fixed deals because of the low interest rate and even less, if any, mortgages in the UK for 20 or 30 year terms with fixed rates so if you are thinking of having this type of loan then you may have to wait some time for rates to rise. Other options are to speak to an independent financial adviser or mortgage broker as they will almost always be able to find you a fixed deal for a longer term than the standard two, three or five years.
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