In times of uncertainty, a guaranteed rate of interest on your mortgage is appealing – but should you agree to fix your rate until 2025?
Yorkshire Building Society has become the latest provider to offer a seven-year fixed-rate mortgage, two years longer than the more common five-year term.
A longer fix can protect you from unexpected rises, but there are significant drawbacks to weigh up, too.
Which? explains the rise of the seven-year mortgage and what you should consider before taking out a loan.
- For an expert recommendation on the best mortgage for your circumstances, call Which? Mortgage Advisers on 0800 197 8461.
More seven-year fixed-rate mortgages available
Over the past year, the number of seven-year fixed-rate deals has more than doubled, Which? analysis of Moneyfacts data shows – although this type of loan still remains much less common than two or five-year deals.
In February 2018, Which? found there were nine seven-year fixed-rate deals on the market from three providers.
Today, there are 26 deals from four providers, namely: Coventry Building Society, Skipton Building Society, Yorkshire Building Society and Virgin Money (click the links to read our reviews of each lender).
Nonetheless, seven-year deals remain extremely rare, making up less than 1% of the 5,472 fixed-rate deals currently on offer across the market.
Best seven-year mortgages
The lowest-rate seven-year deal currently available is from Coventry Building Society, which offers a 2.09% initial rate (3.5% APRC). However, you’ll need a fairly hefty deposit of at least 50% to qualify.
If you have a 25% deposit, you could benefit from the new Yorkshire Building Society range, which offers a 2.26% initial rate (3.6% APRC) at this loan-to-value ratio (LTV).
Longer-term fixes are also available for buyers with small deposits.
If you’ve managed to save 10%, the best seven-year deal is from Skipton Building Society, with a 2.85% initial rate (4% APRC) and no application fees.
Alternatively, Virgin Money offers a seven-year deal if you have a 5% deposit, though the initial rate is a relatively high 4.78% (4.9% APRC).
|50%||Coventry Building Society||2.09%||3.5%||£999|
|75%||Yorkshire Building Society||2.26%||3.6%||£995|
|90%||Skipton Building Society||2.85%||4%||Nil|
- Find out more: fixed-rate mortgages
Seven-year mortgages versus five-year mortgages
Seven-year fixes currently have an average rate of 2.56% – below the 3.19% average for five-year fixed-rate deals.
That said, the best five-year deals are much more affordable than the best seven-year deals, and require a shorter commitment.
You can take out a five-year mortgage from Skipton Building Society for just 1.79% (3.79% APRC) at a loan-to-value ratio of 60%.
You can see the best five-year mortgage deals based on different LTVs below.
|60%||Skipton Building Society||1.79%||3.79%||£1,995|
|95%||Family Building Society||3.09%||4.4%||£599|
You can also compare hundreds of mortgages with Which? Money Compare.
Should you fix your mortgage for seven years?
Fixing your mortgage for an extended period can protect you from rate rises and give you certainty over your repayments.
With uncertainty surrounding Brexit and its effect on interest rates, you could potentially benefit from locking into an affordable deal now. While the base rate has risen twice in the past year, it remains low compared with previous decades.
That said, it’s difficult to predict what the market will look like in seven years’ time. Rates could also drop, leaving you locked into a deal that no longer seems as attractive.
However, the most important thing to consider before opting for a seven-year deal is whether you’re likely to stay in the same home for that long. If you have any major life changes on the horizon – such as moving job location or having children – a long-term fix might not be right for you.
This is because most fixed-rate deals will charge hefty fees if you leave the mortgage early due to moving house. These fees tend to start high and scale down over the course of the fixed-rate period.
Below are the early repayment charges on seven-year deals charged by each provider:
|How far into the deal are you?||Coventry Building Society||Virgin Money||Skipton Building Society||Yorkshire Building Society|
What does this mean in practice? If you had £200,000 outstanding on a Skipton mortgage and decided to repay the entire loan in the third year, you’d face a fee of £10,000 on top of all the other costs of buying and selling.
So if you think there’s a chance you’ll want to move during the seven-year period, it may be worth choosing a shorter fixed-term period or a more flexible mortgage – such as a discount or tracker deal.
In some cases, you may be able to port your mortgage, meaning you can transfer it to the new home without repaying it. However, this will depend on the terms of the loan and the value of the property you’re buying, so you should check your deal carefully and talk to a mortgage broker if you’re unsure.
- Find out more: pros and cons of different mortgage types