What is a long-term fixed rate mortgage?
What is a long-term fixed rate mortgage? Should I get one? And what’s the best long-term mortgage out there? Habito has the answers.
Last updated on
Jul 28, 2022 18:55
A fixed rate mortgage is a mortgage where the interest rate remains the same for a fixed period of time. A long term fixed rate mortgage means your interest rate is fixed for a long period of time. While shorter term fixed rate mortgages are usually fixed for a few years, long term fixed deals last from 5, all the way up to 40 years — depending on which deal you choose.
With any fixed mortgage deal that ends before your mortgage term, when that fixed term is up, you’ll have to remortgage if you want to fix your rate and monthly payments again. A long term fixed rate mortgage gives you all the benefits of a fixed rate mortgage, without you having to remortgage frequently. For this reason, and because their prices have been getting competitive, long term fixed rate mortgages are becoming more and more popular.
Let’s get into everything you need to know about long term fixed rate mortgages.
Fixed rate mortgages are the most popular mortgage deals out there for homebuyers. Why? Because you sign a deal and, for the length of that deal, you won’t be affected by any changes in your lender’s terms or rates. Nice.
Stability is the name of the game. A fixed rate mortgage locks in interest rates and locks out any nasty surprises. Whether you take out a 5-year, 10-year, or longer deal – you’ll know exactly what your monthly repayments will be for that whole period.
This isn’t a given when it comes to mortgages. For example, a fixed rate differs from a variable rate mortgage, in which your interest rate (and ultimately your monthly repayments) can vary.
While tracker rates (a kind of variable rate) can be a good option for some people, especially if you’re pretty sure that rates might go down, variable rates like your lender’s standard variable rate (SVR) can change at the whim of your lender. And if the interest goes up, you’ll end up paying more.
The trouble is that, when your fixed rate mortgage deal ends, you’ll usually get quietly nudged over onto the standard variable rate (unless you remortgage your property).
That’s one of the benefits of longer term fixed rate mortgages. You can put this moment off — maybe even forever! – and not have to worry about the admin, fees, and affordability checks that can come with remortgaging, for longer.
Technically, a long term fixed rate mortgage is any fixed rate mortgage that lasts for 5 years or more.
Once upon a time, these were less popular. 2-year fixed rate mortgages had incomparably better rates than their 5-year and 10-year siblings. But, times change. Nowadays, long term fixed rate mortgages actually make up the majority of the mortgage deals on the market.
While 5 year fixes once seemed long term, you can now fix for 10, 15, and even up to 40 years.
With Habito One, you can fix your rate and monthly repayments for the entire term of your mortgage – right up until you finish paying it off. And this can last for anywhere from 10 to 40 years (more on One below).
A long term fixed rate mortgage means that the interest rate you agree to today will still be yours long into the future, but this greater security means you’ll be paying a bit more in interest now.
So we’ve covered what a longer term mortgage deal is all about, and what some of the tradeoffs are. Let’s lay out the major pros and cons:
There’s always a downside to bear in mind. Here are some to mull over:
Ultimately, there is no one size that fits all when it comes to mortgages. Different home buyers have different needs. For example, if you think you’re going to be selling in a few years’ time, it might not make much sense. And nor if you are buying a place with the intention to let it out.
However, there are lots of situations where the longer the fix, the better. If you imagine yourself in your new home for the foreseeable future, if you’re worried that interest rates could rise and make your mortgage unaffordable, or if you want to be able to budget long-term, being able to set-and-forget your mortgage could be the wise choice.
There are good long term mortgage deals, and then there are the best long term fixed rate mortgages for you. There’s a lot of choice out there and some options will fit your needs better than others.
At Habito, we’ll help you make sense of what mortgage is the best for your unique circumstances. We’re both a lender and a whole-of-market broker — so you’ll also get access to 20,000 deals from over 90 banks and lenders.
To help you make up your mind, we’ve broken down the pros and cons here.
The stuff you need to ask the seller, the estate agents, and your solicitors when you’re buying a home.
Habito specialises in helping you get the best mortgage or remortgage, all online, for free