Compare the best 10-year fixed rate mortgages

Back in March 2020, as the COVID-19 pandemic took hold, the Bank of England (BoE) base rate was cut to a record low of 0.1%. At the time, mortgage rates were already at historical lows, but since then competition in the mortgage market has stepped up a gear and homebuyers can now access mortgage rates of below 1%.

If you’re looking to buy your first home or remortgage and you fancy a bit of security, you might be considering taking advantage of these low rates and locking into a fixed rate deal. Here, we look at whether locking in your interest rate for the next decade with a 10-year deal is right for you.

How does a 10-year fixed rate mortgage work?

The BoE base rate is usually voted on by the Monetary Policy Committee (MPC) 8 times a year. The committee meets roughly every 6 weeks, although the rate isn’t changed each time.

The BoE base rate is generally used as the benchmark for interest rates. Banks use it alongside other economic factors to determine how much interest they will charge on mortgages and other credit products, as well as how much interest they will pay on savings accounts.

For those with a variable rate mortgage, such as a tracker, the interest rate will usually track the base rate. So if the base rate falls, so will your mortgage rate. If the base rate increases, your mortgage rate will also go up and you’ll pay more for your repayments.

However, with a fixed rate mortgage, borrowers are protected against rising rates. You lock in a rate with your lender, then for the duration of that term, your rate stays the same.

If you choose a 10-year fixed rate mortgage, the interest you pay on your mortgage and your monthly mortgage repayments will remain the same for 10 years. This means that you’ll be able to better predict your living expenses for the next decade, which can be particularly appealing if you’re on a tight budget. Even if the base rate rises, there will be no change to your mortgage for those 10 years.

However, the downside is that because 10-year deals offer greater security, they also tend to have higher rates compared to other deals on the market. They are also less flexible than variable rate products and often have higher fees. Having said that, because you won’t need to remortgage for 10 years, you’ll save on remortgage fees.

Fixed rate deals also tend to come with high early repayment charges. This means that should you need to move home or switch deals for any reason, you may have to pay hundreds or thousands of pounds to get out of your 10-year deal early.

What types of 10-year fixed rate mortgages are available?

In the same way as most other mortgages, you can choose from the following types of 10-year fixed rate mortgages:

Residential mortgages

If you’re buying a home to live in (rather than rent out), you’ll need a residential mortgage. Standard 10-year fixed rate mortgages will require a deposit of at least 5% of the property value, but the more you can put down, the better the rate of interest you’ll secure. You’ll also be more likely to access the best rates if you have a good credit score.

Buy-to-let mortgages

If you’re buying a property to rent out to others, you’ll need to take out a buy-to-let mortgage. You’ll usually need to put down a deposit of between 25% and 40% and interest rates tend to be higher compared to residential mortgages. If you want to lock in for a longer period of time, 10-year fixed rate buy-to-let deals are available.

Repayment mortgages

Most 10-year fixed rate mortgages will be on a repayment basis. This means that you repay a portion of the capital (the original amount borrowed) and some interest in each monthly repayment. Providing you meet all of your repayments, your entire loan will be repaid by the end of the mortgage term – typically 25 years.

Interest-only mortgages

Some 10-year fixed rate deals may be interest-only instead. This means that you only pay off a portion of the interest each month. At the end of your mortgage term, you will need to repay the original amount borrowed.

Interest-only mortgages have cheaper monthly repayments but they are less common than repayment mortgages. Those lenders that do offer interest-only deals will have strict lending criteria and will require you to have an approved repayment vehicle in place to ensure you can pay off the capital.

How to compare 10-year fixed rate mortgages

A 10-year fixed rate mortgage can be compared using the same factors as other mortgages, but there are a few additional points to consider.

• Interest rate. The interest rate will determine how large your monthly repayments will be and it will be one of the most important factors when comparing mortgages.
• Fees. As well as the interest rate, you should also take a close look at the arrangement or booking fee for each mortgage. Keep in mind that mortgages with lower interest rates often have higher fees. For this reason, you may find it cheaper to plump for a mortgage with a slightly higher interest rate but lower fee.
• Early repayment charges. These can be higher on 10-year fixed rate deals and are usually around 5% to 10% of the total mortgage debt. Even if you have no plans to get out of your mortgage deal early, it’s worth checking how much the fees would be in the event your circumstances changed.
• Ability to make additional repayments. Similarly, early repayment charges may also apply to overpayments. Most mortgages let you overpay by around 10% a year, but if you go over this, you’ll be charged a penalty. If you think you’ll want to make additional repayments during the year, check the terms and conditions of your deal.

Pros and cons of a 10-year fixed rate mortgage

Bottom line

If you’re looking for long-term mortgage security, applying for a 10-year fixed rate mortgage while rates are low can make good financial sense. After all, you can relax knowing that no matter what interest rates do over the next decade, your mortgage repayments won’t change.

However, before making such a long-term commitment, you’ll need to be sure you have no plans to move or remortgage during that time so that you don’t get hit by hefty early repayment charges.

Frequently asked questions about 10-year fixed rate mortgages

• What happens at the end of my 10-year mortgage term?

  At the end of the deal, you’ll usually be moved over to your lender’s standard variable rate (SVR). This is typically higher than most other rates so it’s a good idea to shop around and move to a more competitive deal.

• Can I get a 10-year fixed rate mortgage with bad credit?

  Whenever you apply for a mortgage, lenders will check your credit history to see how reliable you are as a borrower. You may find it harder to get a mortgage with bad credit, but that doesn’t mean it’s impossible. By shopping around and talking to a mortgage broker you should be able to find a mortgage to suit you. Just be aware you may have to put down a larger deposit and the interest rate charged will likely be higher.

• Can I get a 10-year fixed rate mortgage if I am self-employed?

  In theory, those who are self-employed have access to exactly the same mortgage deals as everyone else, including 10-year fixed rate deals. However, some lenders will require that you’ve been trading for at least 3 years before they will consider you and you’ll need to show 2–3 years' worth of accounts.