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Interest rate vs stability: the move to longer-term fixes

Alan Cleary | Precise Mortgages
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11th October 2019
Alan Cleary Precise
"Borrowers who traditionally might have preferred a shorter-term commitment may now be looking beyond just interest rate"

Whether buying a new home or remortgaging to a better deal, the decision about how long to fix a mortgage rate for is one of the most important decisions a homeowner will make.

Are they after the flexibility and lower rates that shorter-term deals can offer? Or are they looking for the security and peace of mind that comes with a longer-term product?

Whichever term product they decide to go for, they’ve probably never had as much choice when it comes to making their decision as they do at the moment.

According to recent research by Moneyfacts, there are now more than 1,500 five-year deals on the market, almost double the amount that there were five years ago. This increase is across every LTV tier and means the split between two and five-year fixed rates is virtually identical, meaning borrowers now have a much wider range of terms when locking in.

And borrowers aren’t just benefiting from choice in the products they can select – they’re also benefiting from some of the lowest rates in recent times. With falling SWAP rates and fierce competition between lenders to attract new borrowers and ensure existing ones don’t drift away to other lenders, rates for five-year products are now almost as cheap as two-year deals, with the gap closing to the narrowest margin since 2012, the Moneyfacts data shows.

Not surprisingly, the choice in longer-term mortgages at competitive prices has resulted in a growth in popularity as customers look to safeguard their rates in a time of uncertainty. Borrowers who traditionally might have preferred a shorter-term commitment may now be looking beyond just interest rate, and instead preferring the stability of a longer-term deal to protect them against any future economic or political changes.

Here at Precise Mortgages we’re always alive to changes in the market. Whether your customer is planning to purchase or remortgage, is self-employed, a first time buyer or looking to buy a new build property, our residential range of mortgages is designed to help them make the move.

We’ve just launched our autumn special range of mortgages which features five-year products for customers who want to lock themselves in to a longer-term product. We calculate affordability according to the repayment method selected, including interest only, part-and-part, and capital and interest options, and we don’t apply a stress test for borrowers. All of our residential mortgages are tiered to meet individual credit histories which means that customers with less than perfect profiles don’t need to miss out on securing the term product they need.

Whatever your customer’s motivation, whether they want to move to a new product, escape from their existing lender’s reversion rate, unlock equity in their property or are nearing the end of their term, now’s a great time to be looking for a mortgage, particularly if they’re after a longer-term product.

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