Focus on: Leeds’ 10-year fixed rate Help to Buy mortgage

Leeds Building Society has launched the first and only 10-year fixed rate Help to Buy equity mortgage, designed for borrowers who want long-term peace of mind that their monthly payments won’t change.

The building society, which has introduced the deal in partnership with Barratt Developments, has also launched Help to Buy versions of its ‘Welcome Mortgage’ which enables borrowers to pay 0% interest for up to six months at the start of their mortgage.  So let’s take a closer look at the new mortgages to see if any of them could be the right choice for you.

What’s the deal?

The Leeds Building Society 10-year fixed rate deal is fixed at 4.99% and has a £199 booking fee and a £300 completion fee. It is available exclusively to homebuyers purchasing Barratt properties.

As this deal is part of the Help to Buy equity scheme, buyers can apply for this mortgage with a 5% deposit. A further 15% will be paid by the Government through an equity loan which is interest-free for the first five years.

After that, borrowers will be charged an annual fee of 1.75% of the loan amount. This figure rises annually in line with the retail price index RPI measure of inflation, plus another 1%. The equity loan must be paid back when the property is sold or the mortgage is re-paid.

The fixed rate mortgage has tapered early repayment charges, so that if you repay your mortgage in the first two years after taking out the loan, you will have to pay a penalty of 6% of the amount redeemed. This falls gradually to 2% in the final year of the deal.

Leeds is also offering a 10 year fixed rate Help to Buy Welcome mortgage to Barratt homebuyers, which offers three months at 0% and then a rate of 5.16% for the remaining fixed term, or six months at 0% and then a rate of 5.34% for the rest of the fixed rate period. This deal also has a £199 arrangement fee, but it does not have a completion fee.

Adrian MacDiarmid, head of mortgage lender relations at Barratt Development, said; “Homebuyers often find the first few months after buying a home the most financially-challenging with, for example, the need for new furniture - so the idea of a short interest-free period is very attractive, as is the peace of mind that the unique fixed 10-year option provides.”

As well as the 10-year deals, there is a five-year fixed rate Help to Buy Welcome mortgage, with three months at 0% and then a rate of 4.13%, or six months at 0% and then a rate of 4.40%. There is also a two-year fixed rate deal available, with three months at 0% and then a rate of 2.88%. Both of these deals are also exclusively for Barratt homebuyers.

These mortgages are portable, and so can be transferred to another property if you move during the fixed rate period – providing the home is considered adequate security for the loan. This doesn’t have to be a Barratt home, although it must still meet Help to Buy criteria, and you won’t be able to borrow more than you did originally.

All Leeds Building Society Help to Buy mortgages come with a free valuation on properties up to £200,000. Above that value, the borrower pays the difference in valuation fee.

Who’s it good for?

Leeds Building Society’s 10-year fixed rate deal will suit Barratt homebuyers on a tight budget who need to know that their mortgage payments won’t suddenly shoot up when interest rates finally start to rise.

The Welcome 10-year deal, meanwhile, is likely to appeal to those who have perhaps stretched themselves financially to buy a property and need a bit of breathing space initially as they settle into their new home.

Any catches?

Early repayment penalties are steep on these deals, so you must be certain that you won’t need to pay of your mortgage during the fixed rate period.

Bear in mind too that this deal is only available to homebuyers looking to purchase a Barratt property, so you won’t be eligible if you are looking to buy a property built by a different housebuilder which could be quite restricting.
The building society does, however, offer standard Help to Buy five-year and two-year fixed rate deals are priced at 3.90% and 2.50% respectively, and these are available to people purchasing new-build properties from a range of developers, not just through Barratt.

What’s the verdict?

If you are buying a Barratt property and are on a tight budget, then this 10-year fixed rate Help to Buy deal could be a good option, although rates are much higher than those available from shorter-term deals.

David Hollingworth, of mortgage brokers London & Country Mortgages said; “This is the only 10-year fixed rate available to those using the Help to Buy equity loan to purchase a new build property.  Offering the chance to lock in for 10 years its benefit is budgeting stability but that does come at a price, almost double the rate compared with the two-year standard 2.5% fixed option.
He added: “Higher rates, coupled with early repayment charges throughout the fixed-rate period, has often put borrowers off long-term deals and this may also be one that appeals only to a certain niche.”

Top tip!

If you only have a small deposit to put down, don’t assume your only option is to go for a Help to Buy mortgage. Several lenders offer mortgages outside the scheme to those with only a 5% deposit to put down which can provide equal, or sometimes even better, value.

Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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