UK mortgage rates remain at historically low levels with the country narrowly avoiding going into a recession despite the ongoing political uncertainty that could yet have an effect on the economy in 2020. The latest research by Moneyfacts shows that UK households are borrowing at higher and higher levels – £0.4 billion more in October than in September alone. These figures are a likely indicator of people trying to make the most of low-rate, fixed-term mortgage deals, going for more expensive properties as a result.
This is not to say the the total number of borrowers has increased in line with the inflated spend: in fact, the number of mortgage approvals fell slightly in November in comparison with October, to 65,000 mortgages. Despite the mortgage market being saturated with great deals, mortgage lenders are now competing for a smaller pool of mortgage applicants who will qualify for mortgage.
It's not entirely surprising, then, that more mortgage lenders have begun rolling out 10-year fixed-term mortgage offers, with rates on these long-term mortgages having decreased by an average of 0.3 per cent in comparison with last year. In fact, 10-year fixed mortgages are now offered by an impressive 17 mortgage lenders, which is more than double the number of lender that offered these type of mortgages two years ago.
The appeal of the 10-year mortgage is obvious: peace of mind about your mortgage repayments for the next decade, no less. There is a catch, however: these mortgages require higher-than-average deposits. Of the big banks, Halifax and TSB are both offering 10-year fixed rates (2.22 and 2.24 per cent respectively), but they both will only lend at a 60 per cent loan-to-value ratio, which basically means you'd have to stump up a 40 per cent deposit to get approved for one.
This, of course, does make these mortgages available only to people with substantial savings (or help from family) – but applying for this type of mortgage also requires a good amount of confidence in the security of your employment, or the certainty of income from assets that would cover your mortgage.
Don't think you can't quite manage the 10-year mortgage? The five-year fixed rate is your best bet – and it won't require quite as large a deposit.