The pros and cons of long term fixes revealed by mortgage broker, Deal Direct.

Mortgage broker, Deal Direct can reveal there’s a growing trend towards longer-term fixed-rate products for home finance.

The market has been thought of as ‘niche’ and specialised, until now. In the light of the uncertainty created by Brexit, however, many purchasers and homeowners are seeking security and are weighing the option of tying themselves in to a longer-term mortgage. 

Below, we have highlighted what we believe to be the advantages and disadvantages of a fixed rate mortgage that is longer than 5 years. 

Advantages:

• fixed monthly low-rate mortgage prepayment amount for duration of term = security
• ability to over pay up to a stipulated percentage (depending on lender)
• ideal if you know your circumstances aren’t likely to change for the duration

Disadvantages:

• low LTV/high deposit amounts generally required
• miss out on benefit of any rate reductions during the term
• lack of flexibility should your circumstances change

In opting for a fixed rate deal, many borrowers choose 2, 3 or 5 year terms. This is because there’s a level of flexibility that comes with the shorter-term deals that allows for changes in circumstances. Another reason is that the LTV’s tend to be higher meaning less deposit is required. 

However, some lenders who offer the longer-term options recognise that homeowners might be concerned at locking themselves in for a protracted period. This is why some incorporate the option of portability or of ERC at 5 years.     

If you think that a 10 year fixed rate could be just what you are looking for, why not give Deal Direct a call now and discuss your situation in further detail?

Call expert mortgage broker, Deal Direct on 0800 048 8828.