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As the name suggests, a 10-year fixed-rate mortgage is a long-term loan where your interest rate and monthly repayments remain the same for ten years. This means that, whatever happens with the Bank of England’s base rate over the years, your repayments will not be affected.
Fixing your rate and repayments for ten years can give you peace of mind, as it provides you with the chance to budget into the future. In fact, you’ll know exactly how much you owe your lender each month.
If you’re keen on longer-term security and want to fix your monthly payments at the same rate for a decade, then a 10-year fixed-rate mortgage may be what you’re looking for.
With interest rates having risen sharply since 2021, people looking to remortgage, who are happy to stay in their home for that period may find that such long-term stability is worth paying slightly higher monthly payments compared with five-year and two-year fixed-rate mortgages. But they’re not suitable for everybody, especially those who want greater flexibility and may want to move within the next few years.
First-time buyers worried about changing interest rates may also be keen on a 10-year fixed rate mortgage. However, locking in for such a long time on your first home may not be the best course of action if you plan to buy a bigger property within a few years. Usually, ending a fixed-rate deal early incurs hefty penalty fees which might hamper your ability to move up the property ladder.
The good news is that some lenders allow you to move or port your mortgage to another property, meaning you can take your existing deal to a new home. Be sure to check directly with lenders whether their mortgage products are portable.
Fixed costs – As mentioned, one of the most obvious benefits is that your monthly repayments will stay the same for ten years. This means that you’ll always be safe in the knowledge that, should interest rates increase significantly, your repayments won’t become unaffordable.
Beat interest-rate hikes – Long-term fixed-rate mortgages can protect you against rising interest rates. Considering the UK’s current economic situation and rises in the Bank of England’s base rate, mortgage prices are bound to grow. A 10-year fixed-rate mortgage could offer some peace of mind in what is an uncertain time for homebuyers.
Easier long-term budgeting – Being aware of your monthly payments can help you keep your finances in check. With a 10-year fixed-mortgage rate, you’ll know exactly how much to set aside for mortgage expenses and what you can use for other personal spending.
Fewer fees – Taking out short-term fixed deals means that you’ll have to pay an end-of-period fee more frequently. With a 10-year fixed-rate mortgage, you can expect to pay fewer fees over the decade.
More expensive than short-term deals – You may find that 10-year fixed-mortgage rates are more expensive than short-term fixed deals. This is because you’re paying for the security of locking in your rate for a significant period.
Hefty exit fees – If your circumstances change and you need to switch or pay off your mortgage, you’re likely to face a pricey early redemption charge (ERC). This can amount to hundreds, if not thousands, of pounds.
You’ll pay more if interest rates fall – One of the downsides of any fixed-term deal, and a 10-year one especially, is that you won’t be able to negotiate a more favourable rate if interest rates fall. Even if interest rates stay steady over the next ten years, it’s likely that you’ll realise at the end of the term that it wasn’t the cheapest option you could have gone for.
Increasingly, lenders are offering 10-year fixed rates to first time buyers, offering them peace of mind in the long term. Rates offered are usually comparable to two and five-year deals. Rates vary depending on your loan to value ratio.
10-year fixed rate deals are available on buy-to-let mortgages. However, they require a larger deposit than a standard residential mortgage, often 40%.
If you’re looking to remortgage, a 10-year fixed deal can be a great way to protect yourself from further interest rate rises, especially as a higher loan to value should mean better rates. It will mean you can’t take advantage of cheaper deals when rates fall within that 10 year period, however. Remember, you may need to pay early redemption fees if you later move home and cannot port your mortgage.
If you’re moving home, you can find 10-year fixed-rate mortgages to suit your needs. It will give you financial peace of mind at a time when costs can be high. Just be sure to check that your 10-year fixed mortgage can be ported as you may have to pay an early redemption charge if you choose to move before the end of the deal.
There is no right or wrong answer, as it depends entirely on your needs and preferences. When deciding whether it’s a good solution for you, take into account your future plans. Where do you see yourself in ten years’ time? A lot can happen in a decade, and you may have to move home for a number of different reasons, so in this instance, a 10-year fixed-rate mortgage may not be the best option.
If you have a set budget and like to keep a close eye on your monthly spending, then a 10-year fixed-rate mortgage can offer you some peace of mind.
If interest rates fall when you take out a 10-year fixed-rate mortgage, your monthly repayments will not change. This is because you will be locked into the same rate as when you took out the deal.
This can provide far greater stability than a variable rate deal, which changes with the Bank of England base rate. However, you will miss out if rates drop significantly. If you have some spare cash, you can always pay off an extra percentage of your mortgage, as such overpayments cover the capital and not interest of your loan.
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No, not necessarily. If you’re thinking about taking out a 10-year fixed-rate mortgage, you can rest assured that there are many options that allow you to get it with a reasonable deposit.
That said, you’ll always find more favourable deals when you pay a bigger deposit. In fact, a larger deposit can bring your interest payments down.
Yes, you can. If you’re ready to pay off your 10-year fixed-mortgage period, whether that's because you have the finances or simply need to, you're free to do so.
Bear in mind, though, that you’ll have to pay an early repayment charge (ERC). This fee can amount to thousands of pounds. Each lender will have their own rules and policies, but most mortgage providers will allow you to overpay 10% of the outstanding debt every year.
At the end of your 10-year fixed-mortgage deal, you should generally be able to take out a new fixed-rate or variable-rate plan without being charged.
If you don’t do that, you’ll be moved onto the lender’s standard variable rate (SVR). The SVR tends to be higher than a fixed rate, so you may want to consider remortgaging before the SVR kicks in.
Getting a mortgage when you’re self-employed may prove to be a bit more challenging, as you don’t usually take home a secure, fixed annual salary. That said, though, you should still be able to gain access to the same mortgage deals as anyone else, including a 10-year fixed-mortgage.
There is a chance that lenders will expect you to have been in the trade for three years before they’ll consider your application. What’s more, you will probably need to show them two or three years’ worth of accounts and income.
Again, when applying for a mortgage, lenders will need to check your credit score and history. This way, they’ll be able to determine whether you're likely to be a reliable borrower.
There is no hiding that people with a bad credit score may find it trickier to get a mortgage. But this doesn’t mean that you can’t or won’t be able to get one. You may be asked, however, to put down a bigger deposit and pay higher interest rates.
With MoneySuperMarket, you can scour the mortgage market and find the best deal for you regardless of the circumstances.
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