Mortgages with five-year fixed rates have undergone a surge in popularity within the expat community, nearly half of the completed deals recently have been for 5 years or more.
Data revealed 49% of expats are now choosing an initial fixed rate period of five years compared to only 25% back in 2013.
Meanwhile, mortgages with rates fixed for two years have experienced a plunge in popularity with 37% of customers choosing the shorter-term fixes compared to more than half in 2013.
Mortgage brokers think the fact the Bank of England base rate is currently low, coupled with fears over future rate rises, is main driver behind the soaring popularity of five-year deals, which allow customers to lock into a specified rate for a longer term.
Potential pitfalls of five-year deals
While they provide a certain amount of security, five-year fixes aren’t necessarily for everyone. Indeed, several of those questioned in the survey of 200 mortgage intermediaries raised concerns.
They stressed that products with a longer term initial fixed period might only suitable for customers who expected to stay in their current home for an extended period. This was because anyone considering a house move might have to pay early redemption penalties which could outweigh the benefits of a longer-term deal.
Low interest rates, economic uncertainty around Brexit, a reduction in home-mover transactions and more re-mortgaging means that five year products have become a viable option for a much larger proportion of customers.
Going forward, the brokers questioned, did not see any reason for five-year fixed rates to fall out of favour.
However, many said a stable economic climate post Brexit, which could lead to an interest rate rise, was the most likely cause of any reduction in the attractiveness of the five-year fix.
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