Almost half of all mortgage deals are five-year fixes, according to data from Paragon Banking Group.
The group revealed that 49% of customers are opting for an initial fixed rate period of five years compared to just 25% back in 2013.
Experts believe the fall in the Bank of England’s base rate teamed with financial uncertainty in the wake of Brexit are responsible for home buyers’ increased desire for security.
By opting for a five-year fixed rate deal, home buyers can protect themselves from fluctuating interest rates and ensure their mortgage repayments stay the same for a specified period of time.
Although five-year fixed mortgages provide home buyers with a level of security, those who intend to move house within that time frame may face early redemption penalties that could overshadow the benefits of a different deal.
It’s often possible for home movers to ‘port’ their mortgage from one home to another, but this in itself can incur charges.
Nevertheless, with the UK facing an element of financial uncertainty due to the impending exit from the EU, for many mortgage applicants, fixing their deal can protect their finances.
Another factor to consider when choosing a mortgage is the overall term. There once was a time where longer mortgages were considered financially dangerous, but thanks to rising property prices, 35-year deals have become extremely common.
When a mortgage is spread over a longer period of time, more interest is accrued on the loan and it works out more expensive overall.
However, by opting for a longer term mortgage, buyers can also keep their repayments as manageable as possible and improve affordability. If a homeowner gets a promotion or inherits some money, it’s often possible to make overpayments on the mortgage to reduce its full term and pay the debt off faster.
For more information and advice on fixed rate mortgages, please get in touch with the TaylorMade team today.
