Long-term Fixed Rates: Is It a Mortgage Rate Revolution, or About Time!
Category : Mortgage News
Long-term fixed rates have been a hot topic since the announcement by Finance Ireland that they are introducing 10, 15 and 20 years fixed rate mortgages from June 2021. The Irish mortgage market is in turbulent and interesting times. Firstly, Ulster Bank is leaving the Irish mortgage market, followed shortly by KBC. Less lenders, higher rates – formula for disaster. Then thankfully, Finance Ireland and Avant have reduced their rates and introduced long-term fixed rates, hopefully our high street brands that are left will follow suit. Maybe new lenders will even arrive.
What are Long-term Fixed Rates?
Generally, a mortgage rate in excess of 10 years where your interest rate is guaranteed to be at a certain rate as long as you keep up payments. This is considered a long-term fixed rate mortgage. You can now even fix your rate for 20 years!
With Finance Ireland, for example, you buy your first home and have a 90% Loan-to-Value mortgage, you start on a rate of 2.99% fixed for 20 years. If you stay in that home for 20 years, as your mortgage reduces in line with your payments, when your equity increases (Loan-to-Value), your rate reduces until eventually you end up with a rate of 2.6% fixed.
Avant Money followed suit announcing 10-year fixed rate mortgages recently.
|Loan to Value(%)||10 Year Fixed||15 Year Fixed||20 Year Fixed|
|60% or less||2.40%||2.50%||2.60%|
|70% or less||2.55%||2.65%||2.75%|
|80% or less||2.70%||2.80%||2.90%|
|90% or less||2.85%||2.95%||2.99%|
|>60% – 70%||2.25%|
|>70% – 80%||2.35%|
|>80% – 90%||2.65%|
Source: Finance Ireland, Residential Mortgages Rates, May 2021; Avant Money Residential Mortgages Rates, May 2021
Advantages of Long-term Fixed Rates Mortgages
The main advantage of a 20-year fixed rate is that you know your budget now, and you can budget for the next 20 years. You will have the peace of mind in knowing that your long-term fixed rate will only ever reduce and will never go up.
That’s fine you may say, what happens if I move? The great news is that you can take your existing rate with you to your new home. This is another revolution in the market introduced by Finance Ireland.
Even better, you can pay back up to 10% of your outstanding mortgage balance, without early repayment charges, in every year of your fixed rate term. So not only will your fixed rate reduce over time, but you can speed this up without any penalties.
How to Apply for a Mortgage
So, what are you waiting for, no better time to start your mortgage journey! Both Finance Ireland and Avant Money mortgages are accessible through their broker network in Ireland. Mortgage123 has agencies with both lenders and will be in a position to give you the best quote for you.
Long-term fixed rates may not be for everyone, and a good broker will take you through the options. The outlook is great though, lower rates, more options, and forward-thinking lenders. All we need now is a few more lenders.