Borrowers Brexit-proof their mortgage with long-term fix
More borrowers are seeking peace of mind amid the uncertainty of Brexit by fixing their mortgage rate for longer periods.
That is according to Yorkshire Building Society, which has reported a 44% increase in the number of borrowers choosing five-year fixed-rate mortgages in December 2018 compared to same month in 2017.
Seven year and a ten year fixed-rate deals were also rising in popularity as homeowners attempted to secure a static mortgage rate which will remain the same regardless of what happens during and after Britain’s exit from the EU.
How fixed rates work
Fixed-rate deals are currently the more popular option for mortgage borrowers. Data released by Experian in December revealed 89% of people searching for home loans were looking at fixed-rates rather than variable or tracker mortgages, which have rates which go up and down according to the Bank of England base rate.
Fixing your rate means, no matter what is happening to the Bank of England’s rate, the interest you pay on your mortgage will remain the same until the end of the deal.
Janice Barber, mortgage manager at Yorkshire Building Society, said it had noticed a significant rise in the number of people taking advantage of competitive longer-term fixed rate deals.
“While homebuyers’ reluctance to purchase a house during these uncertain times is cooling the housing market, borrowers are rushing to secure new deals that will see them through Brexit and beyond,” she said.
However, she also explained the rush to sign up to long-term fixes might also indicate borrowers were expecting rates to rise.
Securing a deal in advance
Barber added: “Borrowers looking to remortgage this side of summer could start the remortgage process now should they want to take advantage of competitive low rates and get peace of mind that their home loan is arranged regardless of any Brexit outcome.”
The Yorkshire allows potential borrowers to reserve a mortgage deal up to six months in advance. This means anyone whose home loan is due to mature in the coming months can take advantage of today’s deals.
Article by Kate Saines for www.whatmortgage.co.uk