Research shows that fears over the economy post-Brexit is making borrowers exercise caution about the type of mortgage they choose, despite the fact that mortgages are still cheap.
Borrowers seeking a fixed-rate mortgage for the next decade will benefit from the fierce competition among lenders in the 10-year fixed-rate sector.
Latest data shows that the number of fixed rate mortgages that tell homeowners precisely how much their mortgage payments will be for the next decade has increased, as banks and building societies cater for the rising demand.
Homeowners are choosing to pay a little more in interest payments in return for longer-term security in the face of a possible recession and ahead of a doubtful Brexit result, as the 31 October deadline edges closer.
Borrowing is cheap
The increase in availability of longer-term fixed rates comes at a time when borrowing money is historically very cheap. Interest rates are, in fact, very low, but it’s the shorter-term fixes and variable rates that are the cheapest.
Finance experts Moneyfacts have released a report which states that there are currently 242 tracker-rate mortgages on offer in the market, comprising fewer than 5% of all available residential mortgages.
According to their research, competition in the 10-year fixed-rate sector is at its highest level for over 10 years, with more deals available to borrowers now than 12 years ago when Moneyfacts’ digital records began.
However, according to the same source, the number of 10-year fixed-rate mortgage deals has risen to a record 157, and plenty of choice in this field is having a beneficial effect on interest rates.
Homeowners interested in 10-year fixed-rate mortgages one year ago had a choice of 139 deals at an average rate of 3.10%. The unprecedented competition among lenders in this sector is fuelled by demand from homeowners seeking to protect themselves from future fluctuations in interest rates and gain some security during a time of economic flux.
Lowest rate in the 10-year fix sector
Newcastle Building Society has just announced the launch of two 10-year fixed-rate mortgage products. According to Moneyfacts, the offer of a 90% loan-to-value (LTV) fixed at 2.89% is the lowest rate in the 10-year fix sector with a 90% LTV. The lender is also offering an 80% LTV fixed at 2.85%, and both products allow early repayment after five years penalty-free.
Recent data from the Bank of England shows that 92% of all new mortgages taken out at the start of the year were fixed-rate and that the number of borrowers tying themselves to longer-term deals is increasing.
However, a finance expert at Moneyfacts has warned that as a decade-long fixed-rate mortgage is a large commitment, borrowers should feel confident that their circumstances are unlikely to change, in order to avoid the expense of refinancing earlier than expected.
The expert went on to add that there is a far greater choice of mortgages in the five-year fixed market which should ideally be considered as an alternative.
In addition, borrowers should calculate the overall cost of any deal and make every effort to overpay their mortgage, especially if they lock into a low rate, to reduce the amount they owe.