Long-term fixed-rate mortgages could prove cheaper than short-term deals, claims Yorkshire Building Society.
Yorkshire says the recent base rate rise could make longer deals the cheaper option although brokers generally advise clients to choose the cheapest two-year fix and switch to another when it runs out.
Based on its current expectations for rate rises, Yorkshire says five two-year fixed-rate deals including fees would cost £57,150 over 10 years but a 10-year fix at 5.5 per cent would cost £55,750, a saving of £1,400. This is based on a £100,000 interest-only loan at 90 per cent loan to value.
But brokers say it would be difficult to persuade a client to take out a loan at a higher rate when there are cheaper options available. They point out that Yorkshire recently launched a 10-year fixed deal.
Yorkshire head of communications David Holmes says: “It may be worth considering something a bit longer term that buys peace of mind.”
Savills Private Finance associate director Simon Jones says: “It is very pessimistic to assume you cannot do better than 5.99 per cent. I think that Yorkshire might have a bit of a vested interest in saying this.”