Rates for five-year fixed mortgages just keep dropping. Could it be time to ditch that variable and lock in for the long-run?
To fix or not to fix, that is the question: whether ‘tis thriftier in the home to suffer the rises and falls of a variable mortgage... you get the idea. Not quite Shakespeare, but it has a ring to it don’t you think?
Yes, if you’re planning on purchasing a new home soon, or indeed remortgaging, you’ll currently be mulling over an important choice. Should you take advantage of the incredibly low variable deals currently floating about thanks to the 0.5% Base Rate? Or lock in for the long-term at a fixed rate?
Well, unfortunately I can’t tell you that. But I can tell you this...
All-time low
Five year fixed rate mortgages are currently at an all-time low!
But you already knew that, as I wrote about it a fortnight or so ago in Cheapest mortgage rates in 23 years. So what I really mean is that five year fixes are currently at a new all-time low.
Yes, according to Moneyfacts.co.uk, as of Friday 22nd July the average rate for a five-year fixed term re-payment mortgage stands at a wallet-seducingly tiny rate of 5.03%. And it may be even lower by the time you read this!
And there’s one lender that’s going above and beyond everyone else in offering dirt cheap lengthy deals. Just take a look at these newly-reduced five year fixes from Yorkshire Building Society...
|
Max loan-to-value |
Interest rate |
Fee |
|
75% |
3.49% |
£995 |
|
75% |
3.69% |
£95 |
|
85% |
4.24% |
£995 |
|
85% |
4.64% |
£95 |
|
90% |
5.29% |
£995 |
|
90% |
5.49% |
£95 |
As you can see, if you can cobble together a 25% deposit, you’ll be able to snap up a deal for 3.49%. And if you don’t fancy the £995 fee that comes with this mortgage, you can opt for 3.69% product – and only put up £95 in charges.
The Yorkshire’s recent rate slashes catapulted the building society right back to the top of tables for five-year fixes. But that’s not to say there aren’t other competitive deals floating about.
John Fitzsimons looks at three easy ways to reduce how much you are forking out on your mortgage each month
Further frugal fixes
Barclays also this week cut the rates of its Woolwich mortgages – including a couple of five-year deals. Customers with a 30% deposit can now pick up a 3.88% deal – if they qualify for Barclays’ loyalty scheme that is. To be eligible for this scheme you’ll have to be an existing Barclays’ current account customer and have credited at least £800 to your account in each of the last three months before opening the mortgage.
But not to worry if this isn’t you, as a competitively priced 3.99% is open to all other customers.
Barnsley Building Society’s range is a good choice if you don’t fancy shelling out for fees at the start of your deal. The lender has both 75% and 85% fee-free mortgages on offer for 4.19% and 5.29% respectively.
There’s even a sly 95% mortgage hidden away in the five-year fix market. Yes, Nottingham Building Society has taken the plunge at put up a first-time buyer deal priced at 6.39% with a thoroughly reasonable fee of just £195.
So with all these new cut-price deals currently flooding the market – is it really sensible to plump for anything but a five-year fix?
Really time to fix?
Well, it’s undeniable that these rates are incredibly low. However that doesn’t necessarily mean that you should lock yourself in for the long-term.
[SPOTLIGHT] Making a correct and informed decision about a mortgage really depends more on your situation than the markets. This is especially true when it comes to five-year fixes. It sounds obvious, but you should only lock yourself in for five years if you’re positive that you’re going to stay put for five years.
The temptation may be to play the odds and go for a lengthier low rate. But in the long run, if you have to buy yourself out of a five-year deal, you may pay more in early repayment charges than if you’d just plumped for a shorter term in the first place.
And then there’s the tracker dilemma.
The variable question
Variable mortgages are currently sat at ludicrously low rates with some even stretching right down to sub-2% levels. Indeed, as I reported back in May, there are undoubtedly still huge savings to be made by opting for a dirt cheap tracker before the Base Rate rises.
Yet plumping for a variable is always going to be something of a gamble.
Again, think of your own situation and map out the worst-case scenario. No one expected the Base Rate to be chopped to 0.5% back in 2009. If an equally unexpected rise were to take place, would you still be able to make the monthly payments? If the answer is no, then opting for a fixed deal where you are positive of your monthly mortgage spend and hence can budget around it may be a better bet.
However there are couple of mortgages that do allow you to ‘have it both ways’ and take advantage of current low variable deals while protecting yourself against future rate rises. Intrigued? Read The most flexible mortgage in the UK and The tracker mortgage that protects you from rate rises to find out more.
Fifteen fantastic five-year fixes
And finally, here are 15 further deals in addition to the market storming Yorkshire Building Society offers detailed above...
|
Product |
Max loan-to-value |
Interest rate |
Fee |
|
60% |
3.79% |
£1995 |
|
|
65% |
3.99% |
£1499 |
|
|
70% |
3.88% (loyalty customers) 3.99% (new customers) |
£999 |
|
|
70% |
3.99% |
£995 |
|
|
70% |
4.09% |
£0 |
|
|
75% |
4.14% |
£999 |
|
|
75% |
4.10% |
£995 |
|
|
75% |
4.19% |
£0 |
|
|
80% |
4.59% |
£0 |
|
|
80% |
4.59% |
£999 |
|
|
85% |
4.98% |
£995 |
|
|
85% |
4.89% |
0.25% |
|
|
90% |
5.69% |
£895 |
|
|
90% |
5.69% |
£0 |
|
|
95% |
6.39% |
£195 |
Fixed or variable?
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