Focus on: N&P launches market-leading 10-year fixed rate mortgage

First it was two, then five – now it’s the cost of 10-year fixed rate mortgages that are tumbling to competition-busting lows.

Norwich & Peterborough Building Society (N&P) has launched a 10-year deal priced at just 3.99%. What’s more, the mortgage, which guarantees your mortgage payments for the next decade, comes with an arrangement fee of just £295.

You will face penalties if you want to get out within the 10 years, though, and this could prove off-putting for some.
Here, we take a closer look at the pros and cons of the deal.

What’s the deal?

After pulling its competitive 10-year deal last year, N&P has announced a return to the long-term fixed-rate mortgage market with the launch of a 10-year deal charging just 3.99%.

The lowest 10-year fix on the market, it is available to anyone with a deposit of at least 25% via N&P branches, online and or over the phone.

The set-up costs are also low, with an arrangement fee of just £295 as well as a free valuation or legal fees for buyers and cashback for those remortgaging.

N&P’s Richard Barker said: “We know that this competitive rate will be welcome news for those who wish to fix for a longer period of time, particularly as 10-year fixed-rate products are rare at the moment."

Any catches?

Fixing your mortgage rate at 3.99% provides long-term security at a time when interest rates are only expected to go in one direction – up.

However, to profit from this security, you must be happy to lock yourself into a deal for a whole decade.

And while the deal is portable – meaning you can take it with you if you move house within the term – there is no guarantee that N&P will agree to lend you more should you need a bigger mortgage to buy the house of your dreams, for example.

As you can get lower rates on five-year deals (see below), one of these may therefore prove a better bet for people looking for a longer-term fixed-rate mortgage.

What’s the verdict?

This deal is market leading in its category, making it an appealing option for borrowers keen to settle their mortgage payments for the long term.

The Bank of England base rate has been at 0.50% for several years now, but it is very likely to rise from that level within this timeframe.

The upfront costs are very low. And the good news for homeowners and buyers unable to access most top deals because they cannot put down 40% of the property value upfront, is that this is one of the few market leaders open to those with a 25% deposit.

The main disadvantage, however, is that you will face penalties if you need to sell up – for example because of a divorce – or want to move to a more expensive home within the next decade.

Top tip

If you want financial security but are concerned about locking into a mortgage for 10 years, a five-year fixed-rate deal could offer a good compromise.

These too are super-cheap at the moment, with First Direct charging just 2.69%.The downside of this deal, however, is the large arrangement fee, which will add £1,999 to the total cost of the deal over five years. Read more in Laura Howard’s article.

Please note: Any rates or deals mentioned in this article were available at the time of writing.

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