There has rarely been so much choice if you want a long-term mortgage. We look at the best long-term fixed and tracker mortgages.
In the UK, long-term mortgages are much shunned by the industry and borrowers alike, despite the long-term nature of buying a house.
The usual argument is that you might need to move in a hurry, which could be risky. Better to go for shorter deals, which are cheaper in the short term, too.
With everyone just focusing on the short term, the flipside to this coin usually goes unsaid. This is that short-term deals are inherently risky for everyone, not just those who might need to move soon, while longer deals can provide greater assurance, create less worry, paperwork and fees, and can make it easier to plan. Plus, many people will find they can successfully move their long-term mortgages with them if and when the time comes.
Today there are a large number of long-term mortgages compared to the usual, limited levels of choice. Let's take a closer look at the 30-odd mortgages lasting 10 years or more.
Tracker mortgages
A tracker mortgage follows the Bank of England's base rate up and down (in simple terms the base rate is how much it costs mortgage lenders to borrow from the Bank of England for short periods of time).
At present the base rate is 0.5%. If your tracker tracks the base rate plus 2.5 percentage points, your interest rate will start at 3%. If the base rate rises half a point to 1%, you'll start paying 3.5%.
Cheapest long-term trackers
|
Name |
Length |
Interest rate |
Max fees** |
Loan-to-value (LTV) |
|
Term* |
2.64%-4.89% |
£1,000 |
60%-90% |
|
|
Term |
2.79%-4.59% |
£1,000 |
65%-90% |
|
|
Term |
3.18% |
Usually up to £2,500 |
80% |
|
|
Term |
3.49%-3.99% |
£500 |
65%-75% |
|
|
Term |
3.59% |
£1,000 |
75% |
|
|
Term |
3.69%-3.79% |
£1,000 |
70%-80% |
*This means the deal lasts for the whole mortgage, so if your mortgage lasts 25 years then so does the deal.
**Fee-free or low-fee versions of the same mortgage come with higher interest rates. These might be more suitable for people with smaller mortgages, for example.
With these mortgages, you might pay upwards of £450 per month for a £100,000 mortgage.
As you can see in the interest rate and LTV columns, most of these mortgages have variations at different prices. You'll only pay the lowest interest rate shown if you require the lowest LTV shown.
You'll pay higher interest rates the higher your LTV. You'll also pay higher interest rates if you go for the same mortgage with a lower fee or no fee.
HSBC and first direct allow early repayments with no penalty. Bank of China will allow overpayments with no penalty, unless you clear the mortgage in the first year.
first direct and Santander offer offset mortgages, which offset your borrowing costs against your savings. These could work out better for people with lots of savings. For more, read Offset mortgages won't save you money.
Discount and variable mortgages
Discount mortgages offer a discount on a lender's standard variable rate (SVR). With discount and variable mortgages, lenders can change their interest rates at any time, for any reason they want, making them less attractive than trackers.
Cheapest long-term discount mortgages
|
Name |
Length |
Interest rate |
Fees |
LTVs |
|
Cumberland Building Society Offset Mortgage |
Term |
3.44% |
£800 |
75% |
|
Clydesdale/Yorkshire Bank Current Account Mortgage |
Term |
3.79%-3.99% |
£1,000 |
60%-75% |
|
Melton Mowbray Discounted-Rate-For-Term Mortgage |
Term |
3.89% |
£800 |
75% |
|
Coventry Building Society |
Term |
3.99%-4.35% |
£1,000 |
65%-80% |
|
The One Account Current Account Mortgage |
Term |
4% |
£0 |
75% |
These mortgages might cost upwards of £500 per month for a £100,000 mortgage.
[SPOTLIGHT]Cumberland Building Society's mortgage is an offset mortgage. You can overpay as much as you want, but if you clear the debt in the first two years you'll pay a hefty penalty.
Clydesdale Bank's current account mortgage has no early repayment penalties. A current account mortgage works in a similar way to an offset mortgage, in that your savings offset the debt interest you pay. However, the mortgage is in the form of a massive (albeit cheap) overdraft on your Clydesdale current account.
Early repayment penalties for Melton Mowbray end after just one year.
Fixed rate mortgages
The extra protection you get for fixing for a long time comes at a higher cost. That said, long-term fixed rates are currently far cheaper than the historical average.
If you can secure one of these deals, you're likely to do better in the long run than the majority of borrowers over the past 40 years or so (although we can't tell you whether you'll do better than most future borrowers).
For more on the positives (and negatives) of long-term fixed rate mortgages, check out The long-term vs short-term fixed mortgage dilemma.
Cheapest fixed rate mortgages
|
Name |
Length |
Interest rate |
Fees |
LTVs |
|
10 years |
4.58%-4.79% |
£1,000 |
75%-80% |
|
|
10 years |
4.59% |
£1,100 |
75% |
|
|
10 years |
4.79%-4.99% |
£1,000 |
75%-85% |
|
|
10 years |
4.99%-5.19% |
£1,000 |
75% |
|
|
10 years |
4.99% |
£1,500 |
70% |
|
|
10-25 years |
5.24% |
£1,000 |
80% |
These mortgages might cost upwards of about £550 per month for a £100,000 mortgage.
You'll face early repayment penalties for the first seven years with the Manchester Building Society mortgage. These are unusually small at 1.5% for the first five years and 0.75% for the next two.
For all the other mortgages, you'll pay hefty penalties if you leave within 10 years.
At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.
This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article.
Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.
Your home or property may be repossessed if you do not keep up repayments on your mortgage
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