ZPG PLC January 8, 2015
Competition is intensifying in the long-term fixed rate mortgage market as lenders turn their attention to 10-year deals.
Barclays today launched a record low 10-year fix with an interest rate of just 2.99 per cent - thought to be the first ever deal of this length for below 3 per cent.
The offer comes as the number of 10-year deals available continues to soar.
There are currently 77 different mortgages that offer a rate fixed for a decade, up from just 8 in January last year and only 22 as recently as October.
Not only is the level of choice increasing, but the cost of the deals has also come down.
The typical interest rate charged on a 10-year fixed rate loan is now 4.17 per cent, the lowest level ever recorded and down from 4.23 per cent 12 months ago, according to financial information group Moneyfacts.
The group said that while shorter term fixed rate mortgages, of two, three and five years, had previously been favoured by the majority of borrowers, locking into the current historically low interest rates for the longer term was boosting demand for the products.
Meanwhile, lenders who borrowed from the Government's Funding for Lending Scheme are keen to put the funds to use so that they can demonstrate that their mortgage books have grown.
Sylvia Waycot, editor at Moneyfacts.co.uk, said: "The 10-year fixed rate bandwagon is racing down the road and lenders seem to be jumping all over it.
"This is great news for borrowers as they are able to fix their repayments for a decade at a time, which removes the fear of what happens if interest rates rise."
She added that borrowers had previously shied away from long-term fixes for fear that interest rates would drop from their existing level and they would miss out on a cheaper deal.
"However, as the Bank of England Bank Rate is currently sitting at an historic low, and the only talk is of when it should rise rather than drop, this is less likely to be a concern for most people fixing," she said.
The Barclays 2.99 per cent deal is available to homeowners with a 40 per cent deposit who pay a £999 fee.
The group also has a rate of 3.99 per cent for those who have only 25 per cent of their property's value to put down.
Competition among shorter-term fixed rate deals also remains intense, with HSBC launching a two-year deal at just 1.29 per cent.
The mortgage is available on loan-to-value ratios of up to 60 per cent and comes with a £1,499 fee.
Norwich & Peterborough Building Society and the Post Office are both also offering sub-2 per cent two-year fixed rate mortgages, with fees of £195 and no charge respectively.
Meanwhile, First Direct has slashed the rate of its five-year fixed rate loan to a market-leading 2.39 per cent on loan-to-values of up to 65 per cent. The deal comes with a £1,450 fee.
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