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.
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 be suitable for customers who expected to retain their current property for an extended period. This was because Expats considering a house sale might have to pay early redemption penalties which could outweigh the benefits of a longer-term deal.
Low interest rates, economic uncertainty around Brexit and now Covid-19, 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 Expats but do get advice before proceeding.
Going forward, the brokers questioned, did not see any reason for five-year fixed rates to fall out of favour. Brexit and now the Coronavirus could well keep interest rates stable for the time being.
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