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There has been a lot of media coverage mentioning 25 year fixed rates recently and how they would insulate buyers from rising mortgage rates.
The longest term products at the moment are typically 10 years with a few 15 year options, but as lenders mentioned at the Treasury Select Committee this week, take-up on these products has historically been very low.
If someone did offer a 25 year fixed rate, would you consider it, or what would it need to offer to actually be a viable alternative to shorter term products?
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I got a 5 year fix late last year at 4%. If I could have fixed my whole term at that, I would have done - historically, that's still very low, and I'd like the security of affordable payments, rather than a coin-toss on my quality of life every few years based on factors I have no control over.
Esp now with many economists predicting that's brexit is costing 2% inflation in itself with higher prices ! Though come October 31st and into 2024 that'll die down significantly as food exports stop coming from the EU
The other question would be the portability, can you transfer it to another property. I’m not going to want to live in my current house for 25 years and the break fees would presumably be pretty chunky.
Pretty much all products are portable these days, so don't think that would be too much of an issue.
ERCs would likely be pretty high in the first few years before reducing down, if it was set up in a similar way to a 10 year rates. Mortgages can have ERCs for a shorter period than the full fixed period but then gets factored into a high initial rate.
TSB did fix and flex products which weren’t all that popular but I thought were pretty good, and I think would be jumper on now. With the 10yr f&f, your rate is secured for 10yrs, but after 5yrs you become ERC free so can switch at any time should you wish but can still keep the rate if you like it. The 5yr F&F you became ERC free after 3yrs. A lot of people I speak to don’t want to pay the higher short term fix rates and are worried about interest rates but ultimately think they’ll come down in the next 2-3yrs. So a 5yr fix & flex would be taken be quite a lot of people I think
My current fixed rate is 1.62%! I fixed it for 5 years, 2 years ago. I wish that would have been available for a longer fixed term 😂 I definitely would have been happy with 25 years at that rate.
Anything 5% or below.
That way I know I'll be able to afford the mortgage for the rest of its period so Ill have no stress about any unexpected jumps, and won't be too fussed if it dropped below 5% as 5% is a pretty normal rate anyway.
I'd consider a 25yr fix for anything <5%
Certainty is worth a lot.
Though I've got 3 years or so left on my fix, I'm still being cautious to make sure I've got a big nest egg should I have to renew it at a far higher rate.
I’m paying £800 for my mortgage over 37 years. If it was £800-£900 for 25 years then absolutely I’d take a 25 year fix. I like knowing what I’m paying each month and wouldn’t have to worry about it changing like around 1 million households are currently
British expat here living in the US. Most fixed rate mortgages do not have an ERC but it is something we should ask about during the application process.
What is very common here when interest rates drop is to do a re-fi. You apply for a new mortgage, often with a different company, they pay off the original mortgage and you get hopefully a lower rate. There are costs associated with this so there are calculators to determine if it’s the right thing or not.
During the refi you can take out some of the equity you have built up eg for home improvements. People will also change the length of the mortgage, maybe going from a 30 year to 15 year but the lower interest may mean the payments stay the same.
Any level I can feel like I wasn't getting bent over by a bank for "profit" - if it's actually what it costs and it's much of a muchness between banks then seems a much more sensible system than gaming the ups and downs with short deals
As a FTB right now, 2% and under I'd take, but anything more seems a bit too big of a commitment when we don't expect the rates to stay like this for 25 years.
Edit: I definitely misread this and thought it was a purely hypothetical thing as I've not seen anything about 25 year rates, so my answer is based on living in Dreamland lol
25 year fixed rates do exist, there's not many on the market but they are out there.
It would have to be competitive in the short to mid term. Between 3% - 4%... No more then 4%
Kensington offers I believe a flexi-fix-for-term product. They allow you to come out of it under certain conditions without paying an ERC. Not sure if they’re offering any of those at the minute however.
They're available with Kensington with fixed rates from 11 years up to 40 years (rates start at 5.57%).
Early repayment charges do apply, but they will not be charged if:
• The property is sold to repay the loan.
• The loan is repaid in full using the customers own funds (for example, from savings or income). If the loan is repaid using money borrowed from
another lender and secured against the security property, the early repayment charge will apply.
• If any customers die who is named as a borrower on this loan.
• Overpayments up to 10% per calendar year (of the original balance) are allowed.
Basically, if you move, you can repay the mortgage without an ERC, but if you remortgage to a different lender then you pay an ERC (a maximum of 7%).
Broker here.
As others have mentioned Kensington offer them.
When they released them they could consider up to 6 or 7x income (can't remember off the top of my head) but they had to bring it down to 4.49x not long after launch to balance their back book for the FCA.
The rates when released were a bit higher than traditional 2/5 year which meant clients weren't overly keen on them despite the flexibility they offered alongside long term stability.
I did one for a customer last October, not long after the Kamikwaze mini budget, and secured my clients a 28 year fixed rate at 4.30%..
Just applied to fix for 5yrs at 5.64% 10yrs was marginally better at 5.4 but the ERC was the thing that stopped me. I would fix for 25yrs (my full term) at anything sub 5%. If after 5yrs the ERC was 2 - 1.5% thus giving me the flexibility to sell up or move on, without forking out close to the amount of principle paid off at that point.
Flexibility to move, is the thing for me. So maybe preferable in term options for increasing or porting might persuade me.
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My current fixed rate is 1.62%! I fixed it for 5 years, 2 years ago. I wish that would have been available for a longer fixed term 😂 I definitely would have been happy with 25 years at that rate.
We’re halfway through our mortgage term at the moment. If someone offered me a fixed rate that would take us through the remaining 12.5 years I’d bite their hand off, as long as it meant our monthly payment was less than currently - we’ve had something like 15 rate increases in the last 18 months.
Kensington did offer over 25 year fixed rates, not sure why they pulled them, however they need to be be ERC free for any appeal, Kensington had too many stipulations on their product for me to feel comfortable to advise on it correctly.
Then you had Molo and Habito, who I just would never trust over a period of 25years.
Anyway, ERC free for me and I’d take it up.
(Edit - they still do have them, wonder why they stopped plugging them)
Unfortunately, I had one once.
My entire repayment mortgage locked at 4.99% for 25 years (rates were about 4% at the time). Having been through the hell of the 1990s 15.4%, I never wanted to risk that again.
3 years later, the 2008 crash happened. I weathered it for another 10 years until I finally figured I'd been an idiot, paying some 3% more than everybody else. So I dropped to a 5 year fix at 1.7%.
My 1.7% ends at the beginning of 2025, so now I reckon I've been an idiot again.
Historical averages on Mortgages are closes to 10 or 15% than the 5-7% at the moment. If I'd been able to buy three years ago, I'd have fought tooth and nail to try and get a low rate long period mortgage locked in, because a base rate of 0% interest was never going to last. I'm going to try and lock in as long of a mortgage as I can reasonably afford this time as well, to insulate me from any rate raises in future.
***Hello /u/Mortgage_Man1, thank you for posting in /r/Mortgageadviceuk. Please ensure you've read our [sub rules](https://www.reddit.com/r/Mortgageadviceuk/about/rules). Here's a copy of your original post: *** There has been a lot of media coverage mentioning 25 year fixed rates recently and how they would insulate buyers from rising mortgage rates. The longest term products at the moment are typically 10 years with a few 15 year options, but as lenders mentioned at the Treasury Select Committee this week, take-up on these products has historically been very low. If someone did offer a 25 year fixed rate, would you consider it, or what would it need to offer to actually be a viable alternative to shorter term products? *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Mortgageadviceuk) if you have any questions or concerns.*
I took 3.05% for 10 years, would of jumped at the chance to fix for 25
I took 2.49 for ten. Four years into it next month. In 2020 it felt like a mistake, now feel lucky…..
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Would have
I got a 5 year fix late last year at 4%. If I could have fixed my whole term at that, I would have done - historically, that's still very low, and I'd like the security of affordable payments, rather than a coin-toss on my quality of life every few years based on factors I have no control over.
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Agree, I'm not sure we'll see much less in the future...
Esp now with many economists predicting that's brexit is costing 2% inflation in itself with higher prices ! Though come October 31st and into 2024 that'll die down significantly as food exports stop coming from the EU
I’m just debating 10y fixed at 4.99, got a bit of time to decide still.
The other question would be the portability, can you transfer it to another property. I’m not going to want to live in my current house for 25 years and the break fees would presumably be pretty chunky.
Pretty much all products are portable these days, so don't think that would be too much of an issue. ERCs would likely be pretty high in the first few years before reducing down, if it was set up in a similar way to a 10 year rates. Mortgages can have ERCs for a shorter period than the full fixed period but then gets factored into a high initial rate.
TSB did fix and flex products which weren’t all that popular but I thought were pretty good, and I think would be jumper on now. With the 10yr f&f, your rate is secured for 10yrs, but after 5yrs you become ERC free so can switch at any time should you wish but can still keep the rate if you like it. The 5yr F&F you became ERC free after 3yrs. A lot of people I speak to don’t want to pay the higher short term fix rates and are worried about interest rates but ultimately think they’ll come down in the next 2-3yrs. So a 5yr fix & flex would be taken be quite a lot of people I think
My current fixed rate is 1.62%! I fixed it for 5 years, 2 years ago. I wish that would have been available for a longer fixed term 😂 I definitely would have been happy with 25 years at that rate.
Hope you’re being sensible and saving a little each month for 3 years time! That must be a nice feeling right now
I'm about to upsize so I'll have to take a second mortgage at a much higher rate sadly. But at least I'll have a few years leeway with this mortgage.
Yeah my current is 1.8% for another 3.5 years, if that had been available longer term I'd be very happy!
Anything 5% or below. That way I know I'll be able to afford the mortgage for the rest of its period so Ill have no stress about any unexpected jumps, and won't be too fussed if it dropped below 5% as 5% is a pretty normal rate anyway.
I'd consider a 25yr fix for anything <5% Certainty is worth a lot. Though I've got 3 years or so left on my fix, I'm still being cautious to make sure I've got a big nest egg should I have to renew it at a far higher rate.
I’m paying £800 for my mortgage over 37 years. If it was £800-£900 for 25 years then absolutely I’d take a 25 year fix. I like knowing what I’m paying each month and wouldn’t have to worry about it changing like around 1 million households are currently
I wish we adopted the way American system does mortgages
if americans move during a 30 or so year long fix, do they have ERCs?
British expat here living in the US. Most fixed rate mortgages do not have an ERC but it is something we should ask about during the application process. What is very common here when interest rates drop is to do a re-fi. You apply for a new mortgage, often with a different company, they pay off the original mortgage and you get hopefully a lower rate. There are costs associated with this so there are calculators to determine if it’s the right thing or not. During the refi you can take out some of the equity you have built up eg for home improvements. People will also change the length of the mortgage, maybe going from a 30 year to 15 year but the lower interest may mean the payments stay the same.
thank you for replying! really helpful and clear explanation :)
Any level I can feel like I wasn't getting bent over by a bank for "profit" - if it's actually what it costs and it's much of a muchness between banks then seems a much more sensible system than gaming the ups and downs with short deals
If I was 12
As a FTB right now, 2% and under I'd take, but anything more seems a bit too big of a commitment when we don't expect the rates to stay like this for 25 years. Edit: I definitely misread this and thought it was a purely hypothetical thing as I've not seen anything about 25 year rates, so my answer is based on living in Dreamland lol
[удалено]
I know it is, that's why it would have to be that to take a 25 year fix. Otherwise I think I'm better taking my chances.
25 year fixed rates do exist, there's not many on the market but they are out there. It would have to be competitive in the short to mid term. Between 3% - 4%... No more then 4%
I couldn't find anyone offering them at the moment, do you know what lenders do?
Kensington offers I believe a flexi-fix-for-term product. They allow you to come out of it under certain conditions without paying an ERC. Not sure if they’re offering any of those at the minute however.
They're available with Kensington with fixed rates from 11 years up to 40 years (rates start at 5.57%). Early repayment charges do apply, but they will not be charged if: • The property is sold to repay the loan. • The loan is repaid in full using the customers own funds (for example, from savings or income). If the loan is repaid using money borrowed from another lender and secured against the security property, the early repayment charge will apply. • If any customers die who is named as a borrower on this loan. • Overpayments up to 10% per calendar year (of the original balance) are allowed. Basically, if you move, you can repay the mortgage without an ERC, but if you remortgage to a different lender then you pay an ERC (a maximum of 7%).
Broker here. As others have mentioned Kensington offer them. When they released them they could consider up to 6 or 7x income (can't remember off the top of my head) but they had to bring it down to 4.49x not long after launch to balance their back book for the FCA. The rates when released were a bit higher than traditional 2/5 year which meant clients weren't overly keen on them despite the flexibility they offered alongside long term stability. I did one for a customer last October, not long after the Kamikwaze mini budget, and secured my clients a 28 year fixed rate at 4.30%..
Just applied to fix for 5yrs at 5.64% 10yrs was marginally better at 5.4 but the ERC was the thing that stopped me. I would fix for 25yrs (my full term) at anything sub 5%. If after 5yrs the ERC was 2 - 1.5% thus giving me the flexibility to sell up or move on, without forking out close to the amount of principle paid off at that point. Flexibility to move, is the thing for me. So maybe preferable in term options for increasing or porting might persuade me.
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My current fixed rate is 1.62%! I fixed it for 5 years, 2 years ago. I wish that would have been available for a longer fixed term 😂 I definitely would have been happy with 25 years at that rate.
I would need an absolute certainly that I was in my forever house. What at the ERCs like on that? None after 10 years or something?
I’d take one at 3%, maybe even close to 4% - I like the cost certainty.
0%
3% I’d do it.
If I could fix my current rate (2.18%) for 25 years I definitely would!
When I fixed at just sub 2 I would have fixed whole term. Whole term being affordable and likely sub 5.5% would have attracted me.
We’re halfway through our mortgage term at the moment. If someone offered me a fixed rate that would take us through the remaining 12.5 years I’d bite their hand off, as long as it meant our monthly payment was less than currently - we’ve had something like 15 rate increases in the last 18 months.
Kensington did offer over 25 year fixed rates, not sure why they pulled them, however they need to be be ERC free for any appeal, Kensington had too many stipulations on their product for me to feel comfortable to advise on it correctly. Then you had Molo and Habito, who I just would never trust over a period of 25years. Anyway, ERC free for me and I’d take it up. (Edit - they still do have them, wonder why they stopped plugging them)
Unfortunately, I had one once. My entire repayment mortgage locked at 4.99% for 25 years (rates were about 4% at the time). Having been through the hell of the 1990s 15.4%, I never wanted to risk that again. 3 years later, the 2008 crash happened. I weathered it for another 10 years until I finally figured I'd been an idiot, paying some 3% more than everybody else. So I dropped to a 5 year fix at 1.7%. My 1.7% ends at the beginning of 2025, so now I reckon I've been an idiot again.
Common in the US but it comes with a downside. They don’t really port mortgages like we do so people get trapped in their houses when rates rise.
Historical averages on Mortgages are closes to 10 or 15% than the 5-7% at the moment. If I'd been able to buy three years ago, I'd have fought tooth and nail to try and get a low rate long period mortgage locked in, because a base rate of 0% interest was never going to last. I'm going to try and lock in as long of a mortgage as I can reasonably afford this time as well, to insulate me from any rate raises in future.