Financial certainty with long-term fixed rate mortgages

Financial certainty with long-term fixed rate mortgages

Islay Robinson

Against an uncertain economic backdrop, locking into a long-term fixed rate mortgage offers investors security and stability. Interest rates are at record lows providing borrowers with an opportunity to secure extremely favourable costs of financing for many years ahead.

Only those with a crystal ball know how long rates will stay low, but fixed rates mean investors don’t have to worry and can financially plan for the future with this element of certainty. A further benefit of committing to a long-term mortgage is the protection it offers capital against inflation. The security offered by such an arrangement is all the more appealing when there is doubt over the economic outlook.

Enness has access to more than 300 lenders across the globe allowing us to source the best mortgage cost and conditions for each of our clients.

Temptingly low rates

High net worth borrowers in the UK can currently expect to secure rates well below 2% on a wide range of mortgage arrangements. For example, at 60% loan to value (LTV) on a two-year fix, rates are as low as 1.79% with private banks. At five years, rates are only marginally higher at 1.99%, providing an extra three years of security at a very small cost. Investors who can commit to a mortgage of 10 years can snap up a rate of 2.39%.

Bargain deals aren’t purely the domain of low LTV borrowers, with tantalising deals also on offer at up to 80% LTV. For example, a borrower at this level can bag a five-year fix of 2.79%, or 10 years at 2.99%. High street lenders also have a range of tempting longer term fixes.

NatWest currently offers as low as 1.41% on a five-year fix, while Barclays will give a rate of just 1.99% on a 10-year fix. Rates are a significant indicator of finance costs, but lender fees are a factor that need to be taken into consideration. Some lenders will charge a flat fee of up to £1,000 while in other cases a percentage fee of the loan.

Percentage fees may run at about 1% or can be as low as 0.25% with certain high street lenders. It can mean that a higher rate may actually work out at better value when the lender costs are taken into consideration.

Enness negotiates all aspects of the deal on behalf of their client, including rates and lender fees. We carefully look at the entire cost of the mortgage, as well as all the terms and conditions, to provide clients with bespoke solutions on the most cost-effective basis.

Fixing for a decade

Locking into a fixed rate for 10 years can suit a range of buyers, such as those who want a lasting family home or a holiday home to be used year after year. The main consideration with fixing for this length of time are early repayment charges (ERCs). If a buyer wants to redeem the mortgage before the end of the product term, lenders will typically charge steep fees that amount to around 5-7% of the loan amount.

However, the benefit of these loans is that they can usually be ported, which means the mortgage can be transferred to a different property should a borrower decide they want to sell and buy a new property. The benefit of using an established broker such as Enness is that we can use our lender connections to negotiate lower ERCs. But a decade long fix wouldn’t suit buyers who could need to sell, for example, to move to another country. Or investors who may want to sell to release profits ahead of the 10-year horizon.

Low-cost borrowing in Europe

With negative interest rates across the eurozone, European mortgage markets are also experiencing extremely low costs of borrowing. In France, borrowers can secure competitive mortgages for between 15 and 25-year terms. There are also interest-only options which can further reduce financing costs for investors.

Enness helps buyers secure prime property, particularly in France and Spain, at the best possible price through our connections to international lenders, private banks and specialist funds.

How Enness can help you

At Enness we can help buyers across the world who want to take advantage of low long-term costs of mortgages. We have access to 300 lenders worldwide with specialist niches to provide solutions to the most complex of borrowing arrangements.

To find out how Enness can help with your long-term financial planning get in touch below.