Why a long-term fixed mortgage deal can pay off

Long-term fixed mortgage deals may not be cheap but they offer big benefits...

We don't all want to chase the best mortgage rates like a dog chasing its tail.

Some people have better things to do than worry about which way interest rates are moving and whether they would have been better off with the three-year tracker over the two-year fixed rate.

Life's too short isn't it?

But just because you don't want to be a 'rate tart' doesn't mean you are happy with any deal, or that you are willing to accept the vagaries of a variable rate. There is a certain type of borrower who wants the security of a fixed rate -- and wants it for a long time.

So what is it about long-term fixed rates that some borrowers love?

Safe, secure and sensible

Firstly, the longer you fix your mortgage rate for the longer you have total payment security. Your rate will stay exactly the same for the length of your fix and this can be anything from a year to 25 years.

So whatever happens to interest rates for the duration of the fix, you won't be impacted. This peace of mind is hugely important to some borrowers who just want to be able to budget and manage their entire finances in the knowledge that their mortgage payment is set.

It also really helps those who cannot afford a large increase in mortgage repayments and would rather pay a slight premium now in return for reassurance that their repayments won't rise to a level that would be hard to meet.

No more switching

Another huge benefit of locking in for longer is that you don't have to worry about remortgaging.

And no matter how much easier and cheaper lenders try to make switching your homeloan, the fact is it can be costly and it is usually a bit of a hassle, unless you enjoy filling in forms.

If you take a 10-year fixed rate you will only have to remortgage once in an entire decade.  If you had flitted between two-year deals in this time, you'd be on your fifth remortgage, and this could quite easily have set you back at least £5,000 and a lot of time.

Long-term rates are simply less hassle, carry fewer switching costs and offer you guaranteed payment security for as long as you want it. Something you cannot get with a tracker, a short-term fix or indeed your lender's standard variable rate.

So why don't we all get one?

Afraid of commitment?

First and foremost, long-term fixed rates are not cheap in comparison to other mortgages and in comparison to the Bank of England Base Rate. Indeed over the last few months they have increased in price making them even less competitive. It was only a few months ago that you could get a five-year fixed rate at under 4%. Now the best buy is 4.95% from HSBC, but you will need 40% equity and £999 upfront to qualify for the deal.

Longer-term fixed rates are more expensive, with Chelsea Building Society offering one of the most competitive 10-year fixes around at 5.69% for those with 25% equity and a £995 fee.

You are looking at 6.49% or more for a 15-year fixed rate (Britannia offers a good selection) and there's just one 25-year fixed rate left on the market -- 5.98% from Kent Reliance Building Society. It comes with a £935 fee to those with 25% upfront.

With short-term fixed rates on offer at significantly less than this, it is clear that you have to be willing to pay a premium to get long-term peace of mind.

But with rates at a historic low it's a premium that some borrowers are willing to pay to shield themselves from inevitable rises. Others believe that with rates predicted to stay low for the next year or so, long-term fixed rates are priced too high to make them attractive.

What else do I need to know?

Something to double check with any long-term fixed rate is that the mortgage is portable -- in other words you can move it to a new property if you decide to move house. Most mortgages are now portable but you should always check before taking any long-term deal.

Another potential drawback to consider is the early repayment charges (ERCs) that almost always come with long-term fixed rates. These charges are levied if you move or pay off your mortgage within the fixed rate period -- however some 10 and 15-year fixes only charge ERCs for the first five years.

Either way, ERCs can make it expensive to move your mortgage if want or need to switch. Remember that people often need to redeem their mortgage for personal reasons -- they may need to downsize or sell up because of redundancy or bereavement, or because of a relationship breakdown. It's not a pleasant thought but a common enough fact of life.

If you fully understand the implications and commitment involved with a long-term fixed rate they can offer you an invaluable payment guarantee and the ability to forget about your mortgage for a while.

Below are some of the best in the current market:

Five-year fixed rates

* first-time buyers only

** purchase only (not remortgage)

*** homebuyers only

Long-term fixed rates

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