They are currently offering a fixed rate of 5.49 percent, which is only just over the Bank of England base rate (5.25 percent).
Interest rates are predicted to rise again this year and more people than ever are turning to fixed rates to protect themselves.
Traditionally fixed rate deals are for two, three or five years. We look at the pros and cons for signing up to a 25 year deal.
Pros and Cons of long term fixed rate deals:
Pros
-
If the interest rates increase over the fixed rate period, you are protected from the rise and your payments will stay the same.
Cons
- If the interest rates fall during the fixed rate period you will not benefit from that fall.
- You are normally tied-in to a fixed rate for the duration of the special deal, so if you pay off the mortgage in full you would have to pay an Early Repayment Charge.
- If you move and port the mortgage to a new property, and need to borrow an extra amount, you need to avoid choosing a top-up product that has ERCs for longer than the remainder of the existing one, which may mean that the extra borrowing is not on a competitive rate.
-
If you can not meet the lender's criteria at the time you want to move, perhaps because you have recently gone self employed and can't prove income, you temporarily have a lower income as a result of maternity leave or your credit status has deteriorated, or the property you want to buy is not acceptable security to your particular lender, you may not be allowed to port the mortgage, meaning you either can't move or you have to pay the ERC.
Ray Boulger, Senior Technical Manager at independent mortgage broker John Charcol, says: "Long term fixed rates are ideally suited to borrowers who intend to live in their property for the long term, and prefer the security of a constant monthly mortgage payment to help with budgeting.
This Nationwide mortgage addresses one of the main reasons why most people don't buy long term deals, i.e. the early repayment charge (ERC). It does this by only imposing this charge for the first ten years.
Thus another way to look at this mortgage is as a ten year fixed rate with an option to continue at the same rate with no ERC for up to another 15 years without incurring any further costs."
