Defaqto on Skipton's seven-year fixed-rate mortgage
View of Defaqto insight analyst for banking David Black
Black says: “Longer-term fixed-rate mortgages seem to have fallen off the agenda recently and the number available has been dwindling dramatically over recent years, with only 1 per cent of the currently available fixed-rate mortgages being for longer than five years.
Three years ago, the corresponding figure was 14.9 per cent. There is some logic because it is a rare day when you hear someone – Gordon Brown apart - saying I want a really long-term fixed-rate mortgage. Judging by product availability, two, three and five-year mortgages are the most common choice of initial rate term for those seeking a fixed-rate mortgage.
The longest fixed-rate mortgage currently available is for 10 years, whereas 25 and even 30-year fixed-rate mortgages were available in recent years.
Borrowers that are looking for a fixed rate mortgage and who decide to plump for a seven-year fixed rate term currently only have a choice of going to Chelsea Building Society or the Skipton – and the Chelsea’s are not offered through intermediaries. This means that there is little with which the Skipton’s mortgage can be directly compared.
The Chelsea’s 90 per cent LTV offering has slightly lower rate at 5.39 per cent but has a £195 fee. The Skipton’s offering has no application fee and offers the additional incentives of a free standard valuation up to a £610 maximum as opposed to the Chelsea’s £500 cash back.
The best deals for 85 per cent LTV fixed-rate mortgages available over alternative initial rate terms, with either no or a very low arrangement fee are, over two years, Yorkshire Building Society’s 3.54 per cent fixed until September 30, 2013 with a £95 fee. Over three years, Yorkshire Building Society’s 3.94 per cent fixed until September 30, 2014 with a £95 fee. Over four years, Santander’s 5.39 per cent fixed until October 2, 2015 with a £495 fee which is only available to first time buyers. Over five years, Cumberland Building Society’s 4.58 per cent fixed until September 1, 2016 with a £299 fee, available within the local lending area only. Over six years, Chelsea Building Society’s 5.39 per cent fixed until August 31, 2017 with a £195 fee up to 90% LTV and over 10 years, Skipton Building Society’s 5.85 per cent fixed until November 30, 2021 with no fee.
The big conundrum for borrowers is to take a view on when, by how much and over what period the bank base rate will increase. Depending upon that view many will stay with their existing variable rate mortgage – according to Lloyds Banking Group’s recent report and accounts, 52 per cent of its mortgages are now on standard variable rate or equivalent products. Or borrowers will plump for either the lower initial rate offered by a base rate tracker mortgage or the certainty of a fixed rate mortgage. How much demand Skipton’s new seven year fixed rate offering will attract remains to be seen.”