Security over monthly outgoings is vital for many homeowners. 5 Year fixes are proving popular.
It was a sharp reminder to a generation of homeowners that low rates would not last forever when Bank of England governor Mark Carney announced in November that interest rates were to rise for the first time in a decade.That reminder – and the announcement there will be two more rises by 2020 – led to a flurry of activity among mortgage holders, who moved to fix their rates and lock in their monthly repayments. The rising cost of household bills further added to demand for the security of fixed-rate mortgages.
Borrowers have been fortunate to see low interest rates encasing the mortgage market over the past few years, so they may not be prepared for more than one rise to be priced in over the next year or so, this demand for fixed-rate mortgages is likely to grow as we face economic uncertainty and speculation of a rate rise as soon as May this year.
So as the next rise nears, is it time to fix your mortgage?
Competitive rates, as well as the impending arrival of a rise, has led to a demand for fixed rates among homeowners who are changing their mortgages, particularly popular are five-year deals. The attraction is they give protection from potential rises for the medium term, without locking the borrower in for too long.There has also been an increase in the number of people locking in for 10 years. Some 10-year products only have early repayment charges for five years, and so can provide flexibility for those who like the idea of fixing for as long as possible, but want some flexibility at the halfway point.
Last year saw fixed-rate deals hit record lows. But since interest-rate rises are now certain since the Bank of England announcement, lenders have been increasing rates.The talk of an impending rise in the base rate has started to feed through to fixed rates. As market expectation of rising rates has pushed funding costs up for lenders, that is ultimately felt in mortgage rates, and there has been a flurry of product withdrawals and fixed deals generally being nudged up. Those changes will result in activity as homeowners look to grab a deal before they are withdrawn. Those that have so far failed to take advantage of the low deals on offer are also more likely to be provoked into action to avoid missing out and to protect against future rises.
In recent weeks, some lenders have increased their rates slightly, but others have dropped them in a battle to increase their share of the market. Overall, my advice to anyone looking at mortgages is to act quickly to avoid missing the best products,”
SO SHOULD YOU FIX?
The first question is what your long-terms plans are. “If you are planning to move, or your circumstances may change in the short term, don’t go for a long-term fix. If you fix for longer than you are absolutely sure about, you will likely have to pay early repayment charges to get out of the mortgage during the fixed-rate period, which can be considerable,” says Harris.
With longer terms often seeming less attractive to borrowers, that has led to the rise in popularity of the five-year fix, although fixes can be had for up to 10 years, the lock-in is often off-putting, and more tend to opt for the medium-term five-year fix.
If your unsure about the options available to you, Come and see me for free no obligation advice and we can look at you getting you the best rate!