Skipton launches fee-free seven-year fixed rate mortgages

Up to 90% LTV deals available.

Skipton Building Society has launched a new range of seven-year fixed rate mortgages.

The deals are unique on the market and are being targeted at borrowers that want to shield themselves from the threat of rising mortgage rates.

The Bank of England Base Rate has been at a record low of 0.5% for over five years now, which coupled with the Government’s Funding for Lending Scheme (FLS), has driven mortgage rates down.

But there have been strong indications that the base rate will rise as soon as next year, which means mortgage rates will soon follow. Read more in What next for inflation and interest rates?

The deals

Skipton’s seven-year deals are available for purchase or remortgage and come completely fee-free, which is unusual for longer-lasting mortgages.

The table below sets out what’s on offer.

LTV	Rate	Fees	ERCs
60%	3.99%	£0	7/6/6/6/5/4/3% until 31/10/21
75%	4.19%	£0	7/6/6/6/5/4/3% until 31/10/21
85%	4.89%	£0	7/6/6/6/5/4/3% until 31/10/21
90%	5.39%	£0	7/6/6/6/5/4/3% until 31/10/21

As you can see the option to fix for seven years is available to a range of borrowers with LTVs ranging from 60% to 90%, meaning those with small as well as big deposits can take advantage.

Early repayment charges apply throughout the fixed rate period with these deals, but overpayments of up to 10% are permitted per annum without penalty.

How they compare

At the moment Skipton is the only provider to offer a seven-year fix. But how do the rates compare to the best on offer from other fixed rate deals?

Below are I've picked out the top deal across 60%, 75%, 85% and 90% LTVs to compare Skipton’s offering.

Best 60% LTV deals

Fixed term	Top provider	Interest rate	Fees	ERCs	More information
Two years	West Bromwich Building Society	1.58%	£2,799	3% until 31/08/2016	Visit our mortgage centre
Three years	Nationwide Building Society	2.49%	£1,204	3% until end of fixed period	Visit our mortgage centre
Five years	Ulster Bank	2.88%	£995	3% of amount repaid until 31/10/2019	Visit our mortgage centre
Seven years	Skipton Building Society	3.99%	£0	7/6/6/6/5/4/3% until 31/10/21	Apply in branch
Ten years	-	-	-	-	-

Those with a 40% deposit tend to get the best deals, but the fees are incredibly high.

The cheapest rate on offer to those with a 40% deposit comes from West Bromwich Building Society with a deal charging 1.58%, which attracts a £2,799 fee. On a £150,000 mortgage taken out over 25 years you would pay £606 a month during the initial period (without adding the fee to the mortgage).

But if you want to lock-in for longer, Skipton’s deal will cost £791 a month for seven years at this loan-to-value, which is £185 more compared to West Brom.

There isn’t a ten-year fixed rate deal at a 60% LTV at the moment so Skipton offers the longest-lasting deal available to this set of borrowers.

Best 75% LTV deals

Fixed term	Top provider	Interest rate	Fees	ERCs	More information
Two years	TSB	1.84%	£1,995	3/1.5% until 30/11/2016	Apply here
Three years	Chelsea Building Society	2.64%	£1,545	3/2/1% until 31/10/17	Visit our mortgage centre
Five years	Chelsea Building Society	3.29%	£1,545	4/4/3/2/1% until 31/10/19	Visit our mortgage centre
Seven years	Skipton Building Society	4.19%	£0	7/6/6/6/5/4/3% until 31/10/21	Apply in branch
Ten years	Yorkshire Building Society	4.34%	£0	7/7/7/6/5/4/3/2/1% until 31/10/24	Apply here

Again the cheapest fixes tend to attract big fees. But longer lasting deals come fee-free.

At this range you can get a ten-year fixed rate at 4.34% from Yorkshire Building Society at a rate of 4.34% with no upfront fee. On a £150,000 mortgage taken out over 25 years this will cost £820 a month compared to £808 a month with Skipton's deal. So the difference between fixing for ten instead of seven years isn't massive.

However, compared to the cheapest fixed rate of 1.84% from TSB these deals cost over £180 more each month.

Best 85% LTV deals

Fixed term	Top provider	Interest rate	Fees	ERCs	More information
Two years	Chelsea Building Society	2.74%	£1,545	2/1% to 31/10/16	Apply here
Three years	Norwich & Peterborough Building Society	3.14%	£1,519	3% then 2% then 1% for 3 years	Visit our mortgage centre
Five years	Chelsea Building Society	3.64%	£1,545	4/4/3/2/1% until 31/10/19	Apply here
Seven years	Skipton Building Society	4.89%	£0	7/6/6/6/5/4/3% until 31/10/21	Apply in branch
Ten years	-	-	-	-	-

Fees on the cheapest deals in the 85% LTV band are again incredibly high.

The cheapest deal on offer is from Chelsea Building Society's two-year fix, which has a rate of 2.74% and comes with a hefty £1,545 fee.

On a £150,000 mortgage taken out over 25 years you would have to repay £691 (without the fee added). The Skipton deal would set you back £867 in monthly repayments, which is £180 dearer.

There are no ten-year deals at a 85% LTV so Skipton is the longest-lasting fix for borrowers that fit thiscriteria.

Best 90% LTV deals

Fixed term	Top provider	Interest rate	Fees	ERCs	More information
Two years	Chelsea Building Society	3.44%	£1,545	2/1% to 31/10/16	Apply here
Three years	Clydesdale Bank	3.64%	£1,250	5/4/3% until 31/10/2017	Visit our mortgage centre
Five years	Chelsea Building Society	4.24%	£1,545	4/4/3/2/1% until 31/10/19	Visit our mortgage centre
Seven years	Skipton Building Society	5.39%	£0	7/6/6/6/5/4/3% until 31/10/21	Apply in branch
Ten years	-	-	-	-	-

For borrowers with smaller deposits of 10% the cheapest fixed rate deal is a two-year fix from Chelsea Building Society which charges 3.44% and comes with a £1,545 fee.

On a £150,000 mortgage over 25 years you’ll have to pay £746 during the initial period (without the fee added) . That's £165 more than Skipton’s deal.

But again Skipton currently offers the longest lasting deal those with a 10% deposit can get as there is currently no ten-year fixed rate on offer to this set of borrowers.

Those with even smaller deposits of 5% should check out: The best Help to Buy mortgages.

Should you fix for so long?

Fixed rate deals provide people with certainty that repayments will stay the same no matter what happens with the economy.

As we’ve seen, two-year fixed rate deals are cheapest but they don’t last long. Fixing for five, seven or ten years is more expensive and these deals often come with high early repayment charges, making them expensive to leave should your circumstances change midway through your deal.

You will need to decide if you can afford to pay the price to fix for longer and whether you are likely to be able to stick with it for the term.

You can compare mortgages in our mortgage centre and keep up to date with the best deals in The best tracker mortgage rates and The best fixed rate mortgages.

More on mortgages:

Help to Buy mortgages explained

Seven reasons mortgage lenders turn you down

The questions you must ask before you buy a house

Mortgage Market Review: Why finding a mortgage is set to get harder