Over the last decade of relatively low interest rates, the idea of getting a long-term fixed interest rate was seen as at best overly cautious and at worst a costly mistake. However, with much higher interest rates across the board, is it worth considering for mortgages in Liverpool now?
The usual wisdom for mixed mortgages was that tracker rates were the cheapest, followed by two-year fixed and then five-year fixed, with ten-year fixed mortgages often having interest rates so high in relative terms that some lenders historically did not offer them.
However, that has started to change as the Bank of England’s base rate, which has a knock-on effect on all other mortgage rates, has increased ten times in a row from 0.1 per cent at the end of 2021 to four per cent by February 2023, 14 months later.
This, compounded with the September 2022 mini-budget, has seen this upend, with rates tending to be better the longer you lock your fix in for, which given that the reason a fixed rate is higher is because of the risks involved in case the rates go up even further, is something of a surprise.
Whilst the best way to see if a long-term fixed-rate mortgage is for you is to discuss your needs with a mortgage broker, there are some general benefits and drawbacks that can let you know at a glance if it’s likely to be the right idea.
The main reason to get one is to protect yourself from other interest rate hikes. If you think that mortgage rates are going to go up more than they already have been, you are much safer locking in now and knowing what you are likely to pay for the next decade.
Of course, if interest rates fall, then you are stuck either paying the higher rate or facing an early repayment charge if you want to switch deals, and in some cases even if you want to move house.