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Mortgage war as ten-year rates plunge to just 2.39pc

Wed 06 Jul 2016

Today's Telegraph article by Olivia Rudgard reports that the lowest-ever ten-year fixed-rate mortgage has been launched as lenders battle to undercut each other to attract business in an uncertain housing market.

Ten-year fixed rates - where borrowers usually have to commit for the full decade - have historically been unpopular, but experts say lenders are now trying to appeal to borrowers who are anxious about long-term instability caused by Brexit.

HSBC will offer a fee-free ten-year fix at 2.79pc from today.

But within hours of the bank's announcement, the deal was undercut by an offering from Coventry Building Society, which will be available from Friday.

The mutual lender will offer a ten-year fix at the all-time low rate of 2.39pc with a product fee of £999, and a fee-free equivalent at 2.69pc. 

While HSBC's offering is available for borrowers with a 30pc deposit, Coventry's loans are only available for borrowers with much larger 50pc deposits. 

However the building society will also launch a ten-year fix for borrowers with a 35pc deposit, available at 2.49pc with a £999 arrangement fee and at 2.79pc with no arrangement fee. 

Both mortgages make the best-buy tables.

Charlotte Nelson, of comparison company Moneyfacts, said that the Coventry's offer will be the lowest in the market, but will be of limited use to many borrowers because of the large deposit required. 

"In terms of true cost I think the Coventry one would be better, but at 70pc loan to value the HSBC product is a great offer. 

"Borrowers need to bear in mind that there may well be a hefty redemption penalty.

"Fixing for ten years is good for those looking for peace of mind - but it is a gamble because we don't know whether rates will go down even further," she said. 

HSBC borrowers will be allowed to overpay by up to 10pc of the mortgage balance each year. 

The Coventry mortgage has early redemption penalties, but they are relatively reasonable. Borrowers will be charged 5pc of the mortgage balance in the first two years, 3pc in the following three years and just 1pc in the final five years. 

The number of ten-year fixes on the market has increased dramatically. In July 2014 there were just 14 available, compared to 130 today. 

Andrew Montlake, of mortgage broker Coreco, said rock-bottom rates on shorter fixes and financial uncertainty were behind the new rates. 

"This is a bit of a sea change where ten-year fixes are concerned. The demand has never really been there, so it will be interesting to see if borrowers go for this.

"I'm sure other lenders will follow suit. Swap rates have fallen so dramatically, and two-year fixes are at rock-bottom - they can't really go any lower, so all the changes will be in five and ten-year products."

Last month HSBC became the first lender to offer a mortgage rate of less than 1pc, on its two-year fixed rate mortgage at 0.99pc.

"Just a note to thank you and all of your staff for the excellent services you provided... You were all extremely helpful and professional during the whole process."
Tim and Pat

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