A third of homeowners planning to remortgage to a long-term fix

Traditionally, a two-year fixed rate deal has been the norm. However, there’s a clear change in attitudes towards long-term fixes, as just 11% of homeowners will currently only consider a short-term fix when they next remortgage. 45% are keeping their options open and will consider both terms.

A fifth (19%) of homeowners are also considering remortgaging before the end of their current fix term, which hints that some are prepared to pay an early repayment charge in order to lock into a new fixed rate deal as rates may still rise further later this year and early next. In September, the Bank of England raised its base rate by 0.5% to 2.25% – the highest level since 2008.

Of those remortgaging only to a long-term fix, 86% would choose a long-term fix between five and ten years. Yet long-term fixed rate mortgages are already commonplace among others; two-fifths (42%) already have a fixed-rate term remaining between four and thirty years.

However, there is a general lack of understanding amongst homeowners around long-term fixed rate mortgages. Comparethemarket’s research shows that no homeowners guessed correctly that the longest fixed-term mortgage rate available is above 40 years. Two-thirds of homeowners (67%) believe the longest fixed-term rate available on the market is between two and ten years, while only 6% were aware that long-term fixed rate mortgages range from 26 to 40 years. When asked what homeowners personally considered a ‘long-term’ fixed mortgage, two-thirds (66%) believed between five to ten years.

Long-term fixed-rate mortgages potentially increase the amount a person can borrow, yet nearly a third (31%) of homeowners have reservations. The main reasons for wariness are: personal circumstances changing and the mortgage becoming inappropriate (56%), interest rates being higher than short-term fixes (45%), and encountering high fees if they decide to change their mortgage product or move home without porting (41%).

Alex Hasty, director at Comparethemarket, commented: “The upwards trend in popularity of long-term fixed rate mortgages looks set to continue, as the cost-of-living crisis grows, and the Bank of England recently raised rates even further."