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With Barclays you can now fix your mortgage at 1.99% for ten years

Barclays offers Britain’s very first 10-year mortgage of less than 2%, but has it been a good idea to stick for so long?

  • Barclays introduces the first 10-year fixed rate mortgage below 2% interest
  • Long-term fix rates are falling across the board amid increased borrower demand
  • Brokers warn borrowers that stopping these deals early can cost them

Homeowners can now cut their mortgage for a decade at a lower price than a standard two-year deal, as Barclays launches its first-ever 1.99 percent ten-year loan.

Available up to 60 percent from loan to value and costing £ 999, the deal is the first of its kind to offer 10 years of payment security at an interest rate of less than 2 percent.

It’s because low interest rates, along with a host of other factors, including increased consumer demand, bring mortgage rates down to historic lows in the long run.

But how does Barclays’ new deal compare, and are there dangers of holding on for so long? We take a look.

Barclays introduced the first 10-year fixed-rate mortgage below 2 percent interest

Barclays introduced the first 10-year fixed-rate mortgage below 2 percent interest

Why do banks offer such cheap deals?

Requests to entice an increasing number of borrowers who wanted to commit their mortgages for longer were made well before the coronavirus outbreak.

This growing number of borrowers may have grown even faster in the months as homeowners increasingly seek stability amid bleak economic forecasts.

This, combined with the current low cost of borrowing money for banks, has lowered long-term interest rates on mortgages to levels never seen before.

Barclays’ offering is currently the cheapest on the market, but there are other options that offer several benefits.

For example, Barclays also offers a seven-year fix for 1.54 percent at a 60 percent loan-to-value and a £ 999 fee – even cheaper than the 10-year deal, but without the security of the extra three years.

Lloyds also offers a 10-year fix at 60% loan-to-value, at 2.08 percent, with a £ 999 fee. On a £ 100,000 mortgage taken out over 25 years, this would be £ 4.39 per cost more than Barclays’ offer, from £ 423.37 to £ 427.76 per month.

Leeds Building Society offers Lloyds an almost identical 10-year fix, at 2.08 percent with a £ 999 fee, but Leeds’ offering is available up to 65 percent of the loan.

TSB also offers a similar 10-year deal up to 60 percent from loan to value at 2.09 percent with a £ 994 fee.

At the moment, Barclays’ new deal remains the cheapest, but this may change. You can use it This is the mortgage finder of Money and L&C to find the best deals for yourself.

Do I have to lock myself longer?

Chris Sykes of Broker Private Finance

Chris Sykes of Broker Private Finance

Chris Sykes of Broker Private Finance

Committing your mortgage payments for ten years helps provide security, but at the cost of the flexibility that a short-term fix would provide.

If you have to repay your mortgage earlier or get another loan to borrow more or move before the end of the term, there are usually expensive early repayment costs.

The new Barclays offering has an early repayment of 5 percent for the full 10 years, which means that you must pay 5 percent of the outstanding loan at any time to switch to a different deal.

There are certain deals, such as one currently available from TSB, that allow borrowers to repair for 10 years, but only have to worry about five-year prepayment costs, according to private finance mortgage broker Chris Sykes.

Usually, however, these types of deals are slightly more expensive than standard 10-year deals, so may not be suitable for everyone.

These terms vary by deal, so it’s important to check how much it can cost you if your circumstances change.

Sykes said, “We have not seen too much of an increase in demand for these products yet, but we expect more to be taken to shield against economic uncertainty.”