It’s no secret that, earlier this year, mortgage rates hit an all time low, with a fixed-rate deal being available for 1.07%. As of the start of September, we continue to see mortgage rates far lower than anyone would have imagined this time two years ago, however one question which we still hear asked on a daily basis is ‘how long should I fix my mortgage for?’ We asked David, one of our mortgage brokers.
Lenders are currently offering fixed-rate deals for anything between one and ten years and which you choose should, above all else, take into account your circumstances and how they’re likely to change over the next ten years. Whilst there’s no denying the fact that the very lowest rates will only be available on one or two year fixed mortgages, for many, there’s a real attraction of fixing payments at a set rate for a period of ten years.
What must also be taken into consideration is that interest rates will rise, it’s simply a question of when. A longer fix, whilst not necessarily the lowest available today could see a small fortune saved over the course of the term should rates rise considerably.
When looking to make a decision as to how long you should fix your mortgage for, however, our top tips are:
Are You A First Time Buyer?
If you’re a first time buyer, it’s generally advised that you should fix your mortgage as this will give you the comfort that you know what your outgoings will be each month. On a variable mortgage, payments can change and, as such, you can’t always be sure what you’ll pay. For first time buyers, budgeting is always key and having a fixed-rate means you won’t be in for any surprises.
Could You Afford Higher Repayments?
In many cases, both first time buyers and home movers are borrowing the maximum they’re able to, due to low wages and high property costs and the question which must always be asked is whether higher repayments could be afforded. If the answer is no, a fixed mortgage is the solution and will ensure you won’t see any changes in payments over the fixed term.
Are You Planning On Moving House Within 5 or 10 Years?
If you’re planning on moving house within five or ten years, don’t be tempted to fix in for more than two or three years as you’ll end up being met with costly early repayment fees. Planning ahead should be a large decision factor and, whilst plans to change, it makes sense to consider your longer-term plans. If you can’t see yourself moving and have found your dream home, fixing for ten years could well see large savings made once interest rates as a whole rise over the coming years.
At the end of the day, for most borrowers, fixing the rate on their mortgage makes sense from a financial perspective and with none of us knowing what interest rates may lie at in 12 months time, there’s every argument that now is the time to buy, so long as you’ve found the right property!