Well, the good news is, right now, mortgage deals are still getting better. Barclays is the latest to improve its 5-year fixed rate to just 2.99%, putting it in joint market-leading place.
What’s the deal?
-This new mortgage from Barclays comes with a low rate of just 2.99% for the next five years
-You will need a deposit of at least 30%
-There’s an arrangement fee of £999
-If you are already a Barclays mortgage customer switching to the deal, you'll get £200 cashback on completion
-The ‘go-to’ rate (standard variable rate) after five years is currently 3.99%. More on this later.
Who is it good for?
Interest rates are bound to rise from the current low base rate of 0.5% in the next five years. In fact, many economists expect them to start going up within the next 12 months – and some even sooner.
And that makes this deal perfect so long as…
-You want the security of fixed monthly payments
-Your circumstances are unlikely to change over the next five years
-You have at least 30% equity in your home – or a cash deposit of 30% if you’re buying
-You are an existing mortgage holder with Barclays
-You're likely to stick with Barclays once the deal ends (current ‘go-to’ rate is the lowest across like-for-like deals, though, don't assume this will be the case in 5 years!)
The main catch with this mortgage – as with all fixed rate deals – is that you will be tied in for the duration of the term which means you’ll pay penalties if you switch away or repay the balance in the next five years.
But unlike some fixed deals, the charges on this one DON’T diminish as the years go on.
You will pay 3% of the outstanding balance at any time to redeem the loan – which is likely to be a lot of money.
There’s also the £999 upfront fee to swallow if you are not already a mortgage customer with Barclays. BUT the advantage of a five-year deal is that you'll only pay it once in that timeframe, opposed to three times if you take a series of two-year fixes (which come with the same kind of fees).
What’s the verdict?
There’s no doubt that this mortgage is a very tasty offering. But Barclays has not just slashed its five-year rate for borrowers with a 30% deposit out of the goodness of its heart. This part of the mortgage market is particularly hot at the moment.
...unlike some fixed deals, the charges on this one DON’T diminish as the years go on
In fact, there are four other lenders offering five-year, 70% loan-to-value deals at 2.99%: Legal & General, Pink Home Loans, Platform and Virgin Money.
And some have lower upfront fees, even if you DO qualify for the cashback. The Pink Home Loans deal, for example has a total fee of £599 – although Platform charges a whopping £1,499.
It's worth a mention though, that all these other deals carry higher SVRs (standard variable rates that kick in after the term) than Barclays’ 3.99% - as below:
*Legal & General: 2.99%, then 4.74%
*Pink Home Loans: 2.99%, then 4.74%
*Platform: 2.99% then, 4.75%
*Virgin Money: 2.99% then, 4.79%
So if you were planning to stay put after the five years and see the rest of your mortgage out with Barclays, its competitive SVR could be useful.
But SVRs are variable and what’s 3.99% now is very likely to be much higher in five years' time if interest rates rise. So don't base your decision on this alone!
To work out the true cost of a mortgage, add the fee to the total you want to borrow and then divide by the number of months. Better still, mortgage broker London and Country's mortgage calculator will do it all for you.
You can get a cheaper five-year fix by raising larger deposit.
If you have a 35% to put down for example, you can fix with First Direct for five years at 2.89%.
The fee is higher though at £1,450, so use the calulator above and factor it into the loan size you need.
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.