Last month, Virgin Money launched a 15-year fixed-rate mortgage. This is the first time we’ve seen a fixed-rate of this length since the start of the economic crisis. So could this mean that we see more lenders introducing long-term fixes. And is it actually wise to lock yourself into a deal for more than a decade?
Why is a 15 year deal so surprising?
The last time we saw a long-term mortgage with a 15-year term was more than 10 years ago, when the now defunct Abbey National and Northern Rock were offering these deals.
The Virgin Money mortgage offers a range of flexible options for their 15-year mortgage – and astonishingly it isn’t just those with a lower loan-to-value (LTV) that are able to take advantage of the low fixed rates. Whilst those with a 65% LTV will be able to benefit from lower rates, the fixed-rate deal is still available to those who are looking for a 95% mortgage.
This means that those first-time buyers who don’t have access to a large deposit could consider this deal. Though whether they’d want to lock themselves into a lengthy deal is a different question altogether.
Is it a good idea to get a long-term mortgage?
One of the main reasons that homeowners lock themselves into a mortgage deal is to avoid any hikes in the Bank of England’s interest rate. With Brexit looming, causing much economic uncertainty, it is no wonder that we are starting to see banks introducing these long-term fixes.
They can give you peace of mind that your monthly repayments aren’t going to shoot up overnight. However, fixing for such a long period of time also means that you could miss out on any interest rate drops too.
Is a long-term mortgage right for me?
For those living in their forever home and in a position to “fix and forget”, signing up to a long-term mortgage deal for up to 15 years could be a suitable plan. If you’re in steady employment and can guarantee that your fixed monthly payments will remain affordable, then it’s certainly worth considering.
You might be looking for a little bit more flexibility with your mortgage, so locking yourself in for 15 years may not be such a good idea.
Long-term mortgages come with significant early-repayment charges. This means that you are able to come out of the deal early to switch to another mortgage, however you’d face a hefty fee for the privilege of doing so. Make sure to read the full terms and conditions of the deal before signing on the dotted line, as it could be an expensive mistake if you don’t.
What other options are there?
Whilst a long-term mortgage deal that lasts for 15 years may appeal to a certain type of homeowner, it isn’t for everyone. However, there are numerous other fixed-rate deals available that will still offer you the benefits of set monthly repayments and the protection from interest rate rises.
The majority of fixed rate deals are shorter-term. 5 year fixes are popular, although if you’re looking for even more flexibility then a 2-year fix could be more up your street. These short-term mortgages are ideal for first-time buyers who want some security, but perhaps are a little uncertain of what the future holds for them, and don’t want to be stuck in a long-term deal.
Speak to a mortgage broker to discuss your circumstances. Whether you’re wanting to fix your repayments until your mortgage is paid off, or you’re looking for a flexible rate to suit your current lifestyle, they will search the market to find the mortgage that’s right for you.
The above post does not constitute advice – financial, legal or otherwise. The information within this article is the author’s own opinion and do not necessarily reflect the views of SO Media or So Smart Money.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.