The brilliant new best buy mortgage

Beat the Base Rate rises by locking into a long-term fix.

The announcement that inflation has rocketed to 4.4% -- its highest level since 2008 -- has once again sparked widespread conjecture of a possible May rise in interest rates.

Of course, there is just as much economic data, and as many economists, who believe that the Base Rate will stay the same until later this year, but that doesn’t stop mortgage borrowers worrying about how higher interest rates would impact them.

Little wonder then that the idea of locking in for longer is currently very attractive. And Nationwide has stolen a march on its competitors with a stonking best buy, five-year fixed rate, as part of a new range of long-term fixes that cater for virtually all borrowers.

Top of the tree?

The lender’s headline rate is its five-year fix at 4.39% -- a cheap deal indeed, and available up to 70% of the property’s value.

This is impressive because most lenders save their best rates for those with a 35% or 40% deposit. Not only does the Nationwide deal knock spots off anything in its own 70% LTV tier, it’s actually a market leader whatever your deposit.

Plus it comes with a pretty standard fee of £995.

Also, if you would rather pay a smaller fee, Nationwide is holding all the cards here too, with a fee-free version of the deal at just 4.59% -- another stellar mortgage that again tops the best buy tables whatever your deposit.

It wasn’t long ago you could fix for five years for under 4%, but rates have risen dramatically in the last six months and these new Nationwide deals now represent great value for money for those who want to lock into a long term rate before they get any higher.

Indeed, with all the current interest rate speculation, it doesn’t look like fixed rates are about to drop any time soon.

So what are the other advantages to locking into a long-term fix?

Benefits of a long-term fix

• For a modest premium compared to a two-year fixed rate you get a whole lot more security. You know your monthly repayments will stay the same for five years, whatever happens to interest rates.
• This enables many couples and families to plan their household budget, which is especially handy if you buy your first home and have other expenses to consider, or if you are planning to start a family and need to know what your outgoings will be.
• If your income is slightly stretched and you know you simply could not afford huge increases in your repayments, a long term fixed rate gives you that peace of mind -- and you won’t have sleepless nights once interest rates start to rise.
• You only pay the mortgage arrangement fee once in five years. If you take out a short-term fix you will pay that fee two or three times in the same period, hiking up the total cost of your mortgage over the five years. The same goes for other costs, like having to pay an exit fee to your existing lender if you switch after a two-year deal.

Any drawbacks?

• Five-year fixed rates are, of course, more expensive than two-year fixed rates. And they are significantly more expensive than tracker deals. If you simply want the cheapest possible mortgage rate right now, get a tracker or a discounted variable rate.
• If interest rates remain low for the foreseeable future you may feel that you are paying over the odds with your long-term fixed rate. And it could end up that you would have been better off during the next five years with a cheap variable deal. Rates would have to go up pretty steeply and quickly for trackers to become more expensive than long term fixes.
• Five-year fixed rates usually come with hefty early repayment charges (ERCs) for the first five years. This means that if you want (or need) to remortgage it will cost you -- and the charges can total thousands of pounds.
• If you want to move house you may be able to take your fixed rate deal with you -- but it is important that you make sure your mortgage is portable.

Below are some of the best buy five-year fixed rates on the market right now, whatever your deposit:

Big deposit – 20% plus

Modest deposit – 10%-24%

More: Find a competitive mortgage | The best mortgages are found off the high street! |High interest rates will crash property prices

Use lovemoney.com's innovative new mortgage tool now to find the best mortgage for you online

At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.

This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article. 

Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.