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How to Beat Inflation by Fixing your Mortgage for Five Years

Housing-Market / Mortgages Apr 03, 2017 - 06:55 PM GMT

By: MoneyFacts

Housing-Market

With inflation starting to bite and the cost of everyday goods rising, now may be the time to think about fixing bills so they do not increase for the foreseeable future. Fixing your mortgage now, particularly for five years’ time, can inflation-proof at least part of your monthly outgoings. And with Moneyfacts.co.uk research showing that the average five-year fixed rate mortgage at 75% loan-to-value (LTV) has fallen by 0.32% in just one year, now might be the perfect time to grab a long-term fixed rate deal.


Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, said:

“The five-year fixed rate market has been improving for some time now, with lenders trying to differentiate themselves from the competition and offering a diverse mortgage range. This has caused rates to fall as providers compete to be the lowest in the market. For example, just two years ago the average rate at 90% loan-to-value was 4.41%, whereas now it stands at 3.37% - a shocking 1.04% less.

“With inflation rising above the Bank of England target for the first time in four years, it is easy to see that even if the Bank doesn’t raise its interest rate just yet, rising costs will soon take their toll on people’s pockets. Five-year fixed mortgages can play a vital role in protecting borrowers from the rising cost of living.

“Five-year fixed rates give borrowers some peace of mind, as they will know that their monthly repayments will remain unchanged for a significant period no matter what else happens. So, any borrower sitting on their Standard Variable Rate (SVR) or coming off an old deal would be wise to consider a five-year option, particularly as uncertainty builds in the economy.

“Borrowers choosing to switch from their SVR to a five-year fixed rate deal could find themselves significantly better off. In fact, based on today’s average SVR of 4.56%, if a borrower were to opt for the average five-year fixed rate at 60% LTV, they would be £232.30* a month better off.

“While we don’t know when rates will rise, or even by how much, we know rates cannot stay at these lows forever. Borrowers will have to weigh up the odds and decide if securing low monthly payments now is the best option for them.”

*Based on a £200,000 mortgage over a 25-year term on a repayment-only basis.

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.


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