Will 10-year fixes leave you nailed down?

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Today, a 10-year fix, usually more expensive than the average home loan, will cost you even less: Leeds & Holbeck building society is offering one at 4.65 per cent.

It's not the only low-cost long-term loan. A rash of cheap 10-year fixes are appearing, says financial analyst Moneyfacts, as "swap rates" - the cost to lenders of borrowing from the money markets - drop.

Britannia introduced a 10-year fix last week at 4.74 per cent, matching a recent deal from Yorkshire building society.

It can go either way with long-term fixes: a slew of rate cuts will leave you paying over the odds, while any rate rises will make your decision a financially savvy one. But the appeal is a simple one: knowing you'll pay the same each month regardless of any rate moves by the Bank of England.

The price of this peace of mind to the consumer has usually been a higher mortgage interest rate. But the latest deals have removed this barrier.

There are caveats, though, warns David Hollingworth of mortgage broker London & Country. Bigger redemption penalties, compared to those for shorter fixes, can await if you need to settle the loan early, he says.

You can expect to pay a 3 per cent fee if you redeem your loan early on a two-year fix. By comparison, the Yorkshire building society's 10-year deal levies a 5 per cent fee for redemption within a year; Leeds & Holbeck charges 6 per cent.

"While nobody in their right mind would take out a 10-year deal only to break it within 12 months, changes such as a job move abroad can happen," adds Mr Hollingworth.

At the Britannia, you'll be stung heavily. "Early settlement with the building society's 10-year fix starts at a 13 per cent fine in the first year - a high penalty starting point."

A consumer's ability to overpay might also cause problems.

While the Yorkshire and Leeds & Holbeck let you pay down up to 10 per cent of your outstanding loan each year Britannia has imposed a monthly £499 ceiling - with fees for paying over this.

If a 10-year fix does suit your budget, check that it offers overpayment flexibility and is "portable" to another home if you move.

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