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Fixed rate mortgages many and tempting

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Long-term fixed-rate mortgages are becoming extremely tempting to borrowers as lenders lower rates further and further. Over the past few weeks, rates on ten-year fixes have fallen even further, with some fixed at 0.25 per cent above the current Bank of England base rate of 4.5 per cent. Taking out a fixed-rate mortgage of this type would allow homeowners to know their exact mortgage repayments right up until 2016.

The Halifax have highlighted the fact that fixed-rate mortgages have increased in popularity recently, currently constituting 76 per cent of mortgage business. However, some experts are urging caution. Fixed-rate deals spread over a ten-year period often carry large early repayment fees, which are calculated as an overall percentage of the balance of the loan. This means that taking out a remortgage is a limited option, and might leave borrowers with a fee running into the thousands.

For instance Woolwich�s great new ten-year deal sits at 4.6 per cent, but borrowers would face an early redemption fee of 4 per cent of the remaining balance. This is by no means a unique situation. For instance, Halifax offers a ten-year fix that starts at 4.99 per cent with an early repayment fee of 5 per cent until 2012 and then gradually decreasing by 1 per cent per year until 2016. Nationwide�s ten-year fix is set at 4.89 per cent, and diminishes from 5 per cent by 0.5 per cent from year one. Leeds� offer is a ten-year deal at 4.69 per cent that drops from 6 to 2 per cent.

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