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Would you like to lock yourself into your current mortgage until 2034? That’s what Virgin Money Accord and Yorkshire Building Society are hoping for as they begin to offer 15-year fixed rates. 15-year fixed rate mortgages haven’t been seen for a decade and this latest reintroduction means lenders think there are enough cautious borrowers to make them a worthwhile product to launch.
On the face of it, the security of fixing repayments for 15 years can seem like a sensible idea. You will be insulated from any rate rises and there will be the long term security of never seeing your payments go up. Unfortunately, as with anything that seems too good to be true there is more than one sting in the tail. As with any long-term fixed rate mortgage the monthly payments are not going to come down either and then there are the substantial early repayment charges (ERCs) that come as part of these mortgages. These can add up to tens of thousands of pounds in the future if your financial circumstances change and you want to switch to a different lender and take advantage of any equity in your property.
Most people in the mortgage industry believe that 15 year fixes will have limited appeal perhaps only appealing to people in the final fifteen years of a mortgage or those who already have substantial deposits that will reduce LTVs. For people with low deposits, the extra interest charges over the term of a 15 year mortgage won’t make financial sense when the rates are in excess of 4.5% on 95% LTV mortgages.
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