A fixed-rate mortgage for 10 or 30 years?
Experts are now expecting fixed rate mortgage rate deals to increase from the current lows, so is it a good time to lock into a long-term ten or 15-year mortgage deal?
With the Bank of England base rate at the record low of 0.5 per cent, up is the only way for interest rates to go, and fixed rates are already starting to head that way.
Mortgage holders at the moment seem happy to be sitting on lenders' low standard variable rates (SVRs), especially as buying into a fix means buying into a higher rate in the short-term.
Long-term rates on five or ten year mortgage deals are higher than two or three year deals, but could you be looking into a mortgage that will provide cheaper repayments over the long term.
With much of the debate now focusing on the right time to skip from a variable rate mortgage to a fixed rate, Daniel Barnes looks at whether it makes sense to fix for the long term, for ten years or even 30 years.
Mortgage brokers report seeing more people opting for ten-year mortgages than ever before. This minority area of mortgage lending remains just a small part of total mortgage lending - but after recent volatility more people are looking for stability.
There are a number of fixed rate mortgage deals out there for the long-term.
Data from Moneyfacts show there are now 47 different ten-year or longer fixed-rate mortgages on the market from 18 providers.
The lowest rate currently is Abbey's ten-year fix which stands at 4.99 per cent - with £995 fees and a maximum LTV of 75 per cent.
Manchester building society is offering a 30-year fix at 5.74 per cent for mortgages up to 70 per cent loan-to-value (LTV). Early repayment charges of three per cent stand for the first ten years.
For loans up to 85 per cent LTV the rate is 5.89 per cent.
Abbey also has a 15-year fix at 5.38 per cent with a maximum LTV of 75 per cent.
This compares with the one of the best two-year fixed rate mortgage from NatWest of 3.19 per cent.
Across the market, some long term rates are rising and some are falling.
Britannia building society has recently decreased its ten-year fix by up to 0.30 per cent, but Chelsea has upped its rate by 0.22 per cent.
The Co-operative Bank, meanwhile, has withdrawn all its ten-year fixed deals.
Fees across all lenders for ten-year fixed rate mortgages stand at the top of the range at £995, although fee-free deals do exist.
The highest loan-to-value level available is 90 per cent from Britannia, although the majority of other mortgage deals are below this.
Long-term for me?
Paul Rumbold, group development director at Manchester, explained the product is not "one size fits all".
"We've had the mortgage for two years as a stock item. We always like to lock in customers for the long-term to build up a relationship."
He explained the average size of a mortgage being taken out was around £125,000 with customers being in their early 40s - having seen periods of high and fluctuating interest rates in the past.
He said customers were "wanting certainty" where not astute enough to keep an eye on the market to switch interest rates.
"Historic interest rates may frighten many," he said and warned interest rates were currently "only going one way".
"People need to think beyond the short-term rates and project themselves two-years into the future and work out where they will be."
Jayne Dono at Britannia explains there were a lot of advantages to being able to fix.
"A five-year fix at the moment is an attractive option," she says.
"In the last year we have seen interest rates come down and many people care about what will happen as they are on SVRs and a new lock starts to look interesting.
She adds interest rates are "now as low as they can go, so fixing could be a sensible option for the long term".
Ms Dono states the longer term products were popular with first-time buyers looking to guarantee mortgage rates are stable for the future as they deal with the cost of a new home and bills.
Short-term culture
The UK has never really embraced long-term mortgages unlike other countries.
There is an understandable fear of locking yourself into a financial product for such a long time, when the variables around people's lives are so varied.
Michael White, chief executive of Email mortgages, explains: "The problem is we have a short-term culture, as opposed to the US where people take up 30 year mortgages."
He adds a further problem comes form the first wave of long-term fixed rate mortgages, that were fixed at nine or ten per cent but seemed like good value when interest rates were 13 per cent.
However, as rates dropped people were stuck with high repayments.
Mr White warns homeowners must be aware of early redemption or repayment charges that may hit if you wish to remortgage.
A three-per cent charge in some cases if your circumstances change can really hit.
Also if you start to earn more - as you would hope over ten years - and want to start repaying at a higher level, some charges could stop you.
For customers, it is a matter of discussing all the pitfalls with a mortgage advisor and making sure you are aware of all the dangers and fees you could encounter.
However, an increase in interest rates now, could turn people towards longer fixes.
Mr White claims the moment the Bank of England increases interest rates "that would be the trigger - and perhaps lenders will not be able to cope - that will impress on people to think about fixing."
He added a lot of people will be looking at the deals available now and thinking "if only".
"You don't want to catch a falling knife, but the knife is firmly in the floor now. What we don't know is how long or wide the floor is.
"All the data recently is telling us we are pretty much at the floor now. We have had a double dip after last year and I think personally people by and large will be seeking to consolidate."
He explains people that were looking for long term fixed rate mortgages were those looking for self protection and control their budgets, such as astute first time buyers and home movers.
"It is about being conservative and being protective."
He added a greater number longer-term mortgages may start coming onto the market - but it would be a long process through the introduction of six and seven year deals.
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