On a 10 year fixed-rate mortgage deal, the interest rate will stay the same for 10 years, regardless of what happens to the Bank of England base rate or across the mortgages industry generally. It gives you the certainty that your mortgage payments won't rise for an entire decade.
There are a number of lenders offering 10 year fixed term mortgages in the current market, with some offering even longer than that. Although in the past, the longer your fixed-rate period, the higher interest rate you would pay, that has not always been the case, especially in the latter part of 2022.
Due to the financial uncertainty in the UK, the gap between two, five and 10 year fixed deal interest rates has narrowed. Some lenders have even offered 10 year fixes at a more competitive rate of interest than their five year deals.
In order to access the best 10 year fixed-rate mortgage deals available, you will need to have a substantial deposit (or level of equity if you’re remortgaging), so it’s important to bear this in mind. In some cases 25% and even as much as 40% deposit will be needed to qualify for the lowest interest rates.
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Whether you should take out a 10-year fixed rate depends on your personal circumstances and preferences. It's important to ask yourself:
How important is it that your mortgage repayments won't increase for 10 years?
Do you think interest rates generally will go up (or down) during the 10-year period?
What are your future plans?
“Many people are opting to fix their mortgage rate for a bit longer. It was always generally a 50/50 split between two-year and five-year fixes, but it seems like people are preferring to lock in a rate for longer now.”
Aidan Darrall, Mortgage Expert at Mojo Mortgages
The financial impact of the Covid-19 pandemic forced interest rates to record lows, but the 2022 cost of living crisis pushed rates back up fast. The Bank of England base rate has risen from 0.1% in December 2021 and currently sits at 3.5%.
A fixed-rate mortgage that lets you lock into today’s rates for two, five or 10 years may, therefore, seem like an attractive option. However, Covid-19 is also a good example of how unexpected events make it impossible to predict exactly when or by how much interest rates will go up or down, so think carefully before committing to a mortgage deal for such a long time.
The length of the fixed-rate deal you choose (or which deal you opt for at all) has no direct impact on your deposit requirement, as all deposit requirements are determined by the LTV of your borrowing.
The LTV or loan to value, is the amount you need to borrow, compared to the full cost of the property, so for example, on a £100,000 property, if you borrowed £80,000, it would be 80% LTV.
Each lender has a maximum LTV they are willing to lend in any scenario, and will usually have a set maximum for each mortgage product, then make adjustments based on your personal circumstances. So, for example, a person with poor credit may not be able to borrow at such a high LTV as someone with the same income, but good credit.
It’s beneficial to have a larger deposit, as this will help lower the LTV of your borrowing, giving you access to better rates. But this is true no matter what length of fix you take, and whether you take a fixed or variable rate mortgage.
You could save a lot of money by switching to a 10-year fixed mortgage deal rather than moving onto your lender’s standard variable rate (SVR) once your current deal ends. But when working out how much you can save by switching, it’s vital to factor in mortgage fees and charges as well as the interest rate.
10-year mortgage costs can include:
Product fee – typically around £1,000, but can be anything from £0-£2,000
Telegraphic transfer fee – typically £20-£50
Valuation fee – £150-£1,000 or more (depending on your property value), although some mortgage deals offer free valuations
Mortgage account fee – typically £100-£300
Mortgage broker fee – this could be £400-£500 or a percentage of the value of your mortgage. The broker may receive a commission from the lender instead or as well
Exit/closure fee – usually £50-£300
ERCs – between 1-8% of the value of your remaining loan, these charges only usually apply if you want to switch during your initial 10-year mortgage deal term and tend to decrease during that time
You will usually be contacted by your current lender in the months leading up to the end of your 10 year fixed-rate deal, but it’s worth popping the date in your diary to keep track of this yourself.
If your deal ends without you realising, you will automatically be transferred onto the lender’s SVR (standard variable rate) which is typically higher than any fixed deals available. However, as mortgage rates have risen across the board, this won’t necessarily always be the case.
Even if the SVR is initially cheaper than your ending fixed-rate deal, bear in mind that as a variable rates, an SVR rate is potentially subject to multiple changes per year, so it may not remain cheaper.
In the six months before your 10 year fixed-rate deal is due to end, it’s a good idea to compare remortgages to see if you could switch to a cheaper deal. You could choose to do a product transfer with your existing lender, either to another fixed-rate deal, or one of their discount or tracker rate deals.
Don’t forget to look at other lenders too at this time, however, to make sure they are not able to offer you more attractive rates. Some lenders have lower introductory periods available to new customers than they do for their existing customers, so it’s certainly possible to save money by moving to another lender.
You can usually lock in a rate up to six months in advance, but you won’t be tied to that new deal until the existing one ends. This means that it’s always a good idea to lock in any competitive rates early, as you can always switch to a better one within that six month period before the end of your current deal, should you find one.
Theoretically, you can repay any mortgage early, however, the vast majority of them will require substantial early repayment charges (ERCs) if you do. ERCs are usually charged as a percentage of your outstanding mortgage balance, so reduce the closer you are to the end of the deal.
It could be very expensive if you decided to switch deals with nine years remaining on a 10 year fixed-rate deal. During the final year of the deal, however, it might be worth comparing the cost of any ERCs with the cost of remortgaging to a new deal to see which works out cheaper.
Although completely repaying your mortgage is not typically recommended on a fixed-rate deal, most will allow you to repay up to 10% of the remaining mortgage balance as an overpayment, per year. This can help you repay more quickly without incurring additional charges.
While there are a number of advantages to a 10-year year fixed mortgage, it’s important to carefully consider whether this type of deal is right for you. The best way to do this is by comparing the total cost – including fees as well as interest payments – over the 10-year term.
The most obvious advantage of a 10-year fixed-rate mortgage is that your mortgage costs will stay the same for the next decade, so – as long as your financial situation stays the same – you know your repayments won’t become unaffordable due to interest rate hikes
If interest rates rise during the 10-year fixed period, you should save money compared to someone on a variable rate
You won’t have to think about remortgaging or paying any of the costs associated with taking out a new mortgage deal for a whole decade
Typically mortgage rates that are fixed for 10 years tend to be more expensive than shorter fixed deals, as you pay for the security of locking in your rate for such a long period. This is not always the case, however, so it’s important to seek advice from a mortgage broker to find the best 10 year fixed-rate deal on the market at any given time
If your circumstances change and you want to switch your mortgage deal or pay it off completely, you’ll face ERCs (early repayment charges) that can amount to hundreds or even thousands of pounds
For most people, it’s far more likely that you’ll want to move house in the next decade, than in the next two years. This means that if your deal is not portable, it could be more difficult to move home. If your mortgage is portable, you should be able to take it when you move home, but ensure you check the terms and conditions before you commit
With a two-year fixed-rate mortgage, your rate – and therefore your monthly mortgage payment – stays the same for two years. The rate may be lower than a five-year fixed-rate, but would only offer certainty for a relatively short period.
If, however, rates go down during the deal period, you’ll be able to benefit from this sooner by locking in a new deal without paying early repayment charges around six months before the deal is due to end.
A five-year fixed-rate mortgage occupies the middle ground between a 2-year and a 10-year deal. You’ll have the peace of mind of knowing what your mortgage costs will be for five years, but won’t be tying yourself into a deal for the next decade.
The longer you fix for, the higher your interest rate often is, so a five-year fixed deal may be more expensive than a two-year fix but cheaper than even the best 10-year fixed-rate mortgage. However, this is not always the case, so be sure to seek advice from a mortgage broker to avoid missing out on the best interest rates.
Not to be confused with a lifetime mortgage , which is an equity release product aimed at the over 55s, it is possible to get a fixed-term deal for the lifetime of your mortgage. They are not always referred to as lifetime fixes, however, and more commonly follow the naming pattern of shorter fixes, for example '20 year fixed-rate deal'.
At the current time, there are 20, 30 and 40 year fixes available, and as most mortgage terms are 25-30 years, it is therefore possible to fix for the lifetime of your mortgage. The benefit is that you will know what your interest rate will be for your whole mortgage term, however, interest rates on this type of deal are typically very high, and won’t necessarily be possible to obtain without a very substantial deposit.
Ten-year fixed-rate mortgages offer certainty that your payments will be consistent for a good length of time. But they are less flexible, so you may have to consider if you'd like to pay off your mortgage earlier or change your deal should your circumstances be different in a few years’ time.”