Yorkshire Building Society has relaunched its 10-year fixed-rate mortgage which it says offers ‘borrowers long-term peace of mind.’
The deal has a rate of 3.99 per cent for mortgages up to 75 per cent loan-to-value (LTV) and is available from today.
Mortgage rates have been dropping since the Funding for Lending scheme launched last August, but lenders have faced criticism for fees that have risen to swallow up much of the benefit to borrowers.
Long fix: Yorkshire BS has relaunched its 10 year fix mortgage - will it strike a chord with borrowers?
But the 10-year Yorkshire deal, fixed until 30 June 2023, comes without a product fee, although it does have a small processing charge of £130.
There are a number of other 10 year fixed rate deals available. HSBC and Leeds Building Society both have 10-year loans at 3.99 per cent.
However, the HSBC mortgage is for borrowers looking for 60 per cent LTV and has a £1,999 product fee. The Leeds deal does have a 75 per cent LTV but again has a steep £1,999 fee.
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The Yorkshire 10-year mortgage is portable which means borrowers can transfer it to a new property if they move home between now and June 2023.
Brendan Gilligan, product manager of Yorkshire Building Society, said : ‘We’ve seen strong demand for our 10-year fixed rate mortgages in the past so we’re pleased to be able to offer this option once again.
‘Borrowers have been taking advantage of our current low mortgage rates by fixing their payments and this latest 10 year product offers them the certainty of knowing what they will be paying each month for years to come.’
The low fee on the Yorkshire product makes it a best-buy.
The 3.99 per cent rate is the same as that on similar recent products from Norwich & Peterborough Building Society – which Yorkshire owns – that have proved popular in the past.
The N&P 10-year deal launched at the start of 2012 sold out within two weeks and was then withdrawn. However, that was against a backdrop of higher rates on shorter fixed rate deals which made the 10-year deal more attractive.
The 10-year N&P mortgage launched this year, also with a 3.99 per cent rate, was not such a fast seller, running for two months before being withdrawn this weekend.
How attractive is the 10-year deal this time round?
So, will this Yorkshire fix prove popular? It all depends on whether homeowners and buyers are looking for long-term security. Most people will not know what they will be doing in 2023 and it is impossible to know what will happen to economy.
And to break out of the mortgage early, the fees are hefty – for the first three years this is set at seven per cent of the amount borrowed. In years four and five this slips down to six per cent, years six and seven four per cent, years eight to nine two per cent and in the final year one per cent.
This makes this a mortgage better suited to those who feel they are in their ‘home for life’ and unlikely to move. However, the deal is portable and so can be taken with you to a new property – but the lender will need to approve the move at the time and there is no guarantee the lender will be able to meet any change in your requirements
David Hollingworth, of London & Country Mortgages, says: 'The attraction is the chance to buy into a stable rate for the longer term especially as we are at such a low in the rate cycle.
'Despite the low rate the challenge for long term fixed rates remains the same in two regards – the rates are higher than those available on short to medium term fixes and they carry early repayment charges throughout the fix, locking the borrower in.
'However borrowers will be cautious about locking into the fix for such a long period as early repayment charges can be very costly if there is a need to review the mortgage requirement.
'For that reason and the fact that they will have half an eye on the lower rates many will still prefer the look of the medium term products. What it does underline though is the increasing level of competitive choices that UK borrowers can pick from.'
This Yorkshire deal is a market leader in a sparsely populated sector of the market, but is is less attractive versus shorter term deals than previous incarnations.
Two and five year fixes - or medium term products that David talks about - are more appealing to borrowers now than a year ago because rates have tumbled and availability has increased. This table shows how quickly rates have dropped.
There are currently 1,125 two year fixed offers compared to 848 a year ago, and 634 five year fixes compared to 366 a year ago.
Chelsea Building Society have a two year fixed rate with a record low 1.74 per cent rate while Yorkshire has a five year fixed with a 2.59 per cent rate.
Both, however, come with hefty fees. Check This is Money’s true cost of a mortgage calculator here.
Yesterday, the Bank of England Funding announced that its Lending scheme is to be extended by a year.
The Bank and the Treasury said that Funding for Lending will be extended by a year to February 2015, albeit with new measures designed to push more cash towards loans for small firms.
This could mean that record low mortgage rates are here to stay – and makes this ten year fix less appealing than this time last year.