Your mortgage ‘term’ is the life-time of your mortgage until it is paid off. As mortgage lenders respond to current market conditions, we’ve seen a growing trend in long term fixed rate mortgages, as well as an increasing number of lenders extending their maximum mortgage term for those buying a home, remortgaging, or considering additional borrowing.
By increasing your mortgage term you extend your borrowing out of a longer period of time and as such can lower monthly payments. However, there are other things to take into consideration so lets take a look.
How long is a long term mortgage?
A mortgage term of 30 years or more is considered a long-term mortgage. Anything less than 20-years is a short-term mortgage.
There are many different types of mortgages available and these will all be packed differently depending on the lender and the external factors affecting what they can offer.
As a result over the past few months we’ve seen lots of different types of mortgage deals come and go as lenders respond to these external factors.
Fixed rates and mortgage terms
Until intertest rates started to increase in 2021 it was reported that the most popular type of mortgage was a fixed rate, 30-year mortgage. However this started to change in 2023. Rates increased further and people felt less inclined to want to lock in higher interest rates.
Irrespective of your mortgage term you can choose to opt for a fixed rate mortgage from anywhere between two and ten years.
The interest you pay will vary throughout the term of your mortgage as one fixed rate comes to an end and you move on to a rate.
How long to fix a mortgage rate
Whether you fix your rate at two, five or ten years really comes down to a number of considerations. All of which you should talk through with your mortgage adviser. Such as:
- How far you think rates could rise or fall in the next few years. Predicting this largely down to guess work so consider how your finances could be impacted should they go up.
- Are you likely to move home in the next two, five or ten years? Even though you can, in many cases move or port your mortgage. There may be implications if you’re on a fixed rate and/or if your personal circumstances have changed.
- Will you require any additional borrowing for example for a home improvement project you’re planning in a year or two? If so then this will likely be at a different rate to your existing mortgage.
Advantages of a long term fixed rate mortgage
Peace of mind
Knowing how much you’re spending each month on your mortgage for a fixed period of time will help you manage your monthly outgoings.
With a long term fixed rate, you’re cushioned against interest rate fluctuations. Ideal if you like stability in your budgeting.
Less impacted by interest rate rises
Interest rates, go up and down all the time. When they go up your protected from the impact having locked in at a lower rate. While those on variable rate mortgages will see their monthly mortgage repayments increase.
Potential to save money
A longer term mortgage means you can save on the time and costs you incur when you remortgage because you wont be doing it as often.
Disadvantages of a long term fixed rate mortgage
Let’s take a look at the flip side and some of the downsides of a long term fixed rate mortgage.
Miss out on rate drops
Irrespective of a drop in interest rates, yours will remain the same for period you’ve fixed for. So, you could end up spending more.
Early redemption penalties
If during the period of your mortgage deal you decide you want to change your mortgage because you’re moving house or want to switch to a better deal, then you may be charged an early redemption penalty.
A long term fixed rate is a long term commitment. So if you’re not sure where you’ll be in a few years time i.e you might relocate with a new job or may need to size up because you plan to start a family, then you might find this type of deal too restrictive.
Its a long term debt
Remember that the longer the term of your mortgage the longer you will be in debt to the mortgage providers. If your goal is to own your own home outright as soon as possible then this might not be the right move for you.
Long term fixed rate mortgages and next steps
Mortgages are complicated and in the current climate different mortgage deals come and go, so seek advice from a mortgage adviser.
They are working with mortgage lenders daily and have knowledge and access to multiple mortgage products.
By having an initial consultation you can share your position and get advice on the right mortgage based on your circumstances and your appetite for the deals available to you. Weigh up the pros and cons carefully so you can make an informed decision with confidence.
Always remember: Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Individual savings may vary, your savings will depend on personal circumstances.
Last Updated: October 6th, 2023