As the Bank of England’s Monetary Policy Committee prepares to meet next week, mortgage lenders and borrowers like are facing the very real issue that the base interest rate may well rise in just a matter of days.
After almost two years of historically low interest rates, the only way for interest rates to go is up, so is it time to opt out of the emotional rollercoaster of interest rates and choose a 10 year fixed rate mortgage deal? They might have disappeared since the days of before the credit crisis, but a recent article in the Daily Mail asked this very question and pointed out two main issues that may suggest the long term fixed rate deal may be about to see a huge revival.
The first is the rising costs of remortgages. Where application fees were once as little as £299, nowadays the typical arrangement fee varies from £999 to £1499 or even as much as 3% of the mortgage balance for the best rates with valuation and legal fees on top. With rates this high perhaps it does make sense to fix for a longer period.
The other major factor is the historically low interest rates. There is only one way to go now and with rising inflation, the gradual phase-out of the bailing out programme for banks, the oil crisis and many more economic factors that indicate the next few years are going to be tough ones. With this in mind, the hassle and stress of remortgaging now may seem nothing when we look at doing the same in a few more years.
Of course, such a long term fixed deal does not come without its disadvantages. Although most mortgages are portable so you can still move home, it would cost dearly to opt out of the fixed rate before its term ends or want to pay off more than 10% of the balance.
Interest rates are changing rapidly but currently are little more than a five year fixed deal so if it’s a route you are considering going down, then it could be time to switch.