Defaqto on Barclays/Woolwich 10-year fix
View of Defaqto insight analyst for banking David Black
Black says: “Traditionally there has been little demand for long-term fixed-rate mortgages, despite Gordon Brown’s well remembered entreaties, with the vast majority of borrowers seeking fixed terms of between two and five years
“There is a general aversion to long-term fixes because of the portability issue. Few people can state with any certainty that they are likely to remain in the same property for the next 10 years and, even for those that think they may, unforeseen future circumstances may dictate otherwise. Those with a relatively low LTV have more leeway, but still have to meet their lender’s underwriting criteria if they move during the fixed-rate term. On the plus side a 10- year fixed rate mortgage provides great certainty.
“Four years ago, borrowers looking for a 10-year fixed-rate mortgage had 124 to choose from. However, a rapid decline saw the number reduce dramatically down to only one in March 2011. Numbers have since picked up but there are currently only 10 available.
The average rate charged is 4.77 per cent with an £828 arrangement fee. National Counties’ offering at 4.19 per cent with a £495 fee allows a maximum LTV of 25 per cent but all the others have a maximum LTV of 70 or 75 per cent, and in the case of the Leeds Building Society, 80 per cent. Against this backdrop the Woolwich has weighed in with a 4.99 per cent rate and a £1,499 application fee.
“When you look at the Norwich and Peterborough’s recent 10 year fix at an eye-catching rate of 3.99 per cent to 75 per cent LTV, with a £295 fee, it does suggest that the Woolwich isn’t going to have to fend off the crowds with its 4.99 per cent offer.
“The N&P mortgage is only available direct whereas the Woolwich’s is also available through intermediaries. Leeds Building Society’s 4.99 per cent rate with a £999 fee for mortgages up to 80 per cent LTV and the National Counties mortgage are also available through intermediaries.
“The Woolwich permits up to 5 per cent to be repaid every year during the fixed-rate period without penalty, whereas N&P allows up to 10 per cent a year, subject to a maximum of £10,000. N&P offers a free valuation and either free legal fees or a £200 cashback whereas those remortgaging to Woolwich get a free non-disclosed valuation and either free legal fees or £200 cashback.”