Five Questions About: Mortgage price war

 

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The Independent Online

Are home loans getting cheaper?

There are some record-low deals being launched as competition intensifies among lenders. This week's most notable new offering was a 10-year fixed-rate deal at just 2.99 per cent, which is the lowest-ever rate for such a long loan.

Who's offering that?

The deal has come from Barclays, which previously offered the same 10-year mortgage at 3.45 per cent. But you'll need a deposit of at least 40 per cent to be eligible. The bank has also cut rates on a number of two-year and five-year fixed-rate mortgages.

Is that as good a deal as it sounds?

"A 10-year fix at 2.99 per cent is a phenomenal rate, and if you can commit yourself for that length of time, you won't regret it," reckons Mark Harris, managing director of the broker SPF Private Clients. He adds, though: "For those who want a bit more flexibility, there are five-year fixes at less than 2.5 per cent or two-year fixes at less than 1.5 per cent."

Are there many other similar deals?

Decade-long mortgages are growing in popularity. There were just eight 10-year deals to choose from a year ago, but by last October that number had climbed to 22, and now the figure stands at 77, according to Sylvia Waycot at the data provider Moneyfacts. She says: "The 10-year fixed-rate bandwagon is racing down the road, which is great news for borrowers as they can fix repayments for a decade at a time, which removes the fear of what happens if interest rates rise."

A decade sounds a long-time to fix. Is it wise?

"Traditionally, the fear for those locked into a fixed rate has been 'what if interest rates drop generally?', which would mean they could miss out on cheaper deals," adds Ms Waycot. "However, the Bank of England base rate is currently sitting at a historic low, and the only talk is of when it should rise, rather than drop."

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