The natural inclination for consumers in a low interest rate environment is to seek value from long term fixed rate products. We are currently seeing lenders competing most aggressively in the five year fixed rate market which has been driving down prices and therefore retaining the greatest consumer appetite. Two of the most popular fixed products at present include Clydesdale Bank’s 5 year fixed rate at 60% LTV on a rate of 2.69% with a £999 fee and Accord’s
5 year fixed rate at 75% with a rate of 2.89% and a £1,845 fee.
Our view is that five year fixed products look set to remain popular in the immediate future as borrowers aim to take advantage of low rates. However, owing to the sheer volume of products of this kind in the market at present, we would urge anyone to seek expert advice before making an informed decision. Whilst low rates are highly attractive, there are other factors which can help borrowers decide which is likely to be the most suitable product for them; flexibility and associated fees for example.
Looking a couple of years down the line towards the future for this market, whilst there are a handful of players currently marketing a small number of 10 year fixed products, namely Woolwich and Santander, rates above the five year term are not looking likely to filter through from lenders at this stage owing to a lack of consumer demand. Anything above a five year period is very difficult to gage for people at most stages of life, unless they are entering into retirement age. Therefore an adviser will generally steer clear of recommending anything across such an extended timeframe where circumstances are more than likely to change.