Borrowers lock into decade-long mortgages as economic uncertainty returns ahead of Brexit
- Number of tracker rate mortgages falls to just 242 different deals
- Borrowers are instead opting to lock into longer term fixed-rate mortgages
- The number of different 10-year fixed rate mortgages hits record high at 157
Mortgage rates may be cheap but fears over the economy are back, and data indicates that it’s having a big effect on the types of deal borrowers are going for.
Borrowing currently doesn’t cost very much. In fact, rates are incredibly low by historic standards and as always it’s the shorter term fixes and variable rates that are the cheapest.
But amid a shrinking economy and ahead of an uncertain Brexit outcome as the 31 October deadline creeps closer, homeowners are opting to spend a little more in interest payments in return for longer term security.
The number of different 10-year fixed rate deals on the market has hit a record high of 157
A report from finance experts Moneyfacts claims there are currently 242 tracker rate mortgages available in the market, making up fewer than 5 per cent of all residential mortgages available.
Meanwhile, Bank of England data shows that 92 per cent of all new mortgages taken in the first few months of the year were fixed rate mortgages – reflecting how little appetite there currently is for variable rates.
On the flipside, the number of people locking to longer term deals is on the rise.
According to Moneyfacts, the number of 10-year fixed rate mortgage deals has hit 157, a record high – and increased choice in this area is having a positive effect on rates.
The average rate charged on a 10-year fixed mortgage stands at 3.01 per cent, a fall of 0.09 per cent year-on-year from the 3.10 per cent recorded in August 2018.
Rachel Springall, finance expert at Moneyfacts, said: ‘Borrowers may well be thinking of different ways to safeguard themselves from potential rate fluctuations in the market, or even for some peace of mind during a period of economic uncertainty.
‘Thankfully, lenders have expanded their mortgage range to accommodate consumers searching for a lengthier fixed term – including a 15-year mortgage launched by Virgin Money within the past fortnight.’
Yesterday, Newcastle Building Society launched two 10-year fixed rate mortgages, one available at 80 per cent loan-to-value and one at 90 per cent loan-to-value, charging 2.85 per cent and 2.89 per cent respectively – the latter becoming the lowest rate in its sector.
Both deals also allow borrowers to repay their mortgage after five years without having to pay any early repayment charges.
Borrowers are turning away from trackers and shorter fixed-term deals amid economic fears
Springall added: ‘A decade-long fixed rate mortgage is no doubt a big commitment, so borrowers must feel confident that their circumstances are unlikely to change to avoid the expense of refinancing earlier than expected.
‘There is a much larger choice of mortgages within the five-year fixed market and these should ideally be considered as an alternative.
‘As with any mortgage, it is important that borrowers weigh up the overall true cost of any deal and make every attempt to overpay their mortgage to reduce the amount they owe – especially if they lock into a low rate.’