Monday, September 11, 2006

Borrowers shelter in 10-year fixes

Long-term home loans are growing in popularity due to concerns about more rate rises.
By Clare Francis (The Sunday Times)

"INTEREST rates were kept on hold last week, but borrowers are still flocking into fixed mortgages due to fears that base rate could go up later this year. Some are even opting to fix for 10 years because rates are lower than on five-year deals.

The Bank of England’s monetary policy committee (MPC) voted to keep interest rates at 4.75% last week, but most economists polled by Reuters, the data firm, think there will be a further quarter-point increase in November.

The risk of further rises has caused huge demand for fixed rates. Short-term fixes are still the most popular — 75% of people opted for two-year deals last month, according to Mortgagesdirect, a broker — but 10-year deals are looking increasingly competitive and you do not have the hassle of remortgaging every couple of years.

David Hollingworth at L&C Mortgages, a broker, said: “While the majority of people still prefer short-term deals because it gives them the flexibility to reassess their circumstances every few years, the cost of remortgaging is rising because fees have gone up so much. An increasing number of people are looking to lock into longer-term deals as a result.” "

This is something I arranged for most of my buy-to-let properties some time ago. I never thought that a two-year deal was a true fixed rate because of the shortness of the period.

Chris Bell