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10 year fixed rate mortgages
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What is a 10 year fixed rate mortgage?
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.
Are interest rates lower for 10 year fixed rate mortgages?
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.
How to find the best 10-year fixed mortgage rates
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Should I get a 10 year fixed rate mortgage?
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 multiple times from 0.1% in December 2021 and currently sits at 4.5%.
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.
Do I need a larger deposit for a 10 year fixed mortgage?
The length of your fixed-rate deal has no direct impact on your deposit requirement, as this is 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 usually has a set maximum LTV for each mortgage product, but also make adjustments based on your personal circumstances. 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.
What other fees are involved with a 10 year fixed-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) when your current deal ends. 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
What should I do at the end of the 10 year fixed rate term?
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 can usually lock in a remortgage rate up to six months in advance, but you won’t be tied to it until your current deal ends. This means you can switch again if a better deal becomes available before then.
Can I pay off my 10 year fixed rate mortgage early?
You can repay any mortgage early, but this will usually result in substantial early repayment charges (ERCs). ERCs are usually charged as a percentage of your outstanding mortgage balance, which can be thousands of pounds, but will usually reduce the closer you are to the end of the deal.
Most fixed-rate mortgages allow you to make overpayments up to the amount of 10% of your remaining mortgage balance per year - this can help you repay your mortgage sooner without ERCs.
Advantages and risks of a 10 year fixed rate mortgage?
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
Alternatives to 10-year fixed-rate mortgages
Two-year fixed-rate
With a two-year fixed-rate mortgage, your rate stays the same for two years - so your repayments won't rise during that time. Interest rates may be lower than a five-year fixed-rate, but offer a relatively short period of certainty.
Five-year fixed rate
A five-year fixed-rate mortgage offers the peace of mind of knowing your mortgage costs for five years, but won’t tie you into a deal for the next decade. 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.
Lifetime fixed-rate mortgage
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. Interest rates on this type of deal are typically very high, but you can usually remortgage without paying ERCs - although always check the individual terms and conditions.
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.”Kellie Steed, Mortgage Content Writer
