Time to fix?

By JO THORNHILL
Updated:

 

HOMEBUYERS who want a fixed-rate mortgage are being advised to act quickly. Volatile money markets drove up the cost of borrowing for banks last week and as a result experts predict that the best loan deals could soon vanish.

Ray Boulger of independent broker Charcol says: 'Woolwich, C&G and Portman have already pulled their best fixed rates. I'm sure other lenders won't be far behind. Anyone who wants a fixed-rate deal should act now.'

Alliance & Leicester has a 4.25% five-year deal, and in the ten-year band, Kent Reliance building society is offering a 4.78% mortgage.

But Boulger says borrowers thinking about long-term deals should consider the pitfalls. 'The longer the term, the more important it is to have a loan with flexible features, which allow overpayment and underpayment. Always bear in mind the redemption penalties and seek out loans with a regular get-out clause.'

Cheshire building society has the longest mortgage deal on the market. Its 25-year, 5.59% fixed-rate loan, for those with a five% deposit, has steep redemption penalties, but does allow overpayments of up to £5,000 a year.

After seven years, there is an option to redeem in full without penalty. A similar window to redeem is then repeated at two-year intervals until maturity.

Leslie Jacobs, finance director at London independent adviser Mortgage Monitor, says long-term fixed rates suit those looking for absolute security. 'If you are over-stretching with your mortgage or are borrowing a large amount, a long-term fixedrate loan can remove the risk if interest rates rise,' he says. 'But interest rates could fall further this year, so go for a deal that doesn't impose heavy redemption penalties.'

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