Chelsea Building Society has launched a market-leading 10-year fixed rate mortgage but experts warn it may not be suitable for all.
The 3.99% home loan, which comes with a £1,495 application fee, and is available to those borrowing up to 70% of the property value, is unlikely to ever look a bad rate, it is claimed. This is because homeowners will be locking in at a low point in the interest rate cycle.
- 10-yr fix at 3.99% with £1,495 fee
- Market-leading but...
- ... could cost borrowers moving home
It is on a par with many lenders' five-year fixed rates, and would cost a borrower with a typical £150,000 repayment mortgage £799 a month (£9,588 a year) if the fee is added to the loan.
David Hollingworth, from broker London & Country, says the deal is "eye-catching".
Is it any good?
However, ten-year fixes, which are rare, come with catches given they may prevent borrowers from moving home during the term, unless they pay a premium.
Hollingworth cautions: "Security comes at the cost of flexibility. If the borrower needs to move home they can take the deal with them and should hopefully be able to top up with a new rate from Chelsea.
"The rate may or may not be particularly competitive but more importantly there is no guarantee Chelsea will lend the level of additional borrowing required.
"That could leave the borrower needing to find additional funds from elsewhere or having to pay the early repayment charge (ERC) to then approach a lender that can fulfil the new borrowing requirement."
The ERC on this deal is up to 7% of the outstanding balance at the time. On a £100,000 mortgage, this is £7,000.
Hollingworth adds: "That is an issue with portability in general not Chelsea but it is a reason that some will be hesitant about locking in for that long."
Typical two and five year fixed deals are already at record lows.