Would you get the new 7 year mortgage - and should you?

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The Chelsea Building Society has announced that it is launching a new mortgage, where customers can choose to fix the rate for either five, six or seven years.

It's a relatively rare option in the market, and will look attractive for those concerned about forthcoming interest rate rises, so is it worth considering?


The offer
The rates will depend on the deposit you have available. If you have a 30% deposit you can get a 3.99% deal with a £195 fee and £500 cash-back. If you have a 20% deposit you can get a 4.39% deal and if you have 10% you'll get a deal at 5.39%. You can then choose whether to fix for five, six or seven years.

Chris Smith the Chelsea's Group Mortgage Manager said: "Customers can decide how long they wish to fix their mortgage payment for which can be a big help when the economy is looking rather gloomy. By allowing them to choose extended terms we can offer some stability for those who wish to know what their monthly outgoings are going to be for the longer term

So are these deals worth considering?
Certainly the five year deal is eye-catching, and is among the lowest on the market. It would have taken the top spot if Barclays hadn't just slashed its Woolwich five year fix to 3.88% for those who qualify for a Barclays Loyalty mortgage and 3.98% for everyone else. The experts agree that if you are considering fixing your mortgage, five year fixes are probably at rock bottom rates right now, and it's a very good time to look into one. Nine mortgage lenders currently have deals below 4%, which is highly unusual.

The question is therefore whether it's worth fixing for the long term. The huge advantage at a time like this is that interest rates are at record lows. There's no real guidance on when they will increase, but the only way they can go from here is up. When rates do eventually start to rise, the fixed rate will come in very handy. And it's arguable that we won't see rates fall back again to these levels within the next seven years.

The disadvantage is that you will pay more interest than on an equivalent tracker mortgage, and if rates don't rise for a year or two, you will see yourself paying over the odds. In addition, you are tied into these mortgages. Often you can move them when you move property. However, if your circumstances change and you need to sell up entirely, you split with your partner, or you can no longer afford the mortgage, you will usually have to pay large redemption fees - often of 5% of the mortgage. This is a major cost at a time when you're likely to be trying to hang onto every penny.

Only you will know which of these benefits and risks is most relevant to you and which is your top priority. For those who like the idea of locking into a low rate while they can, this mortgage and others on the market certainly offer food for thought.

But what do you think? Are you planning a fix? Let us know in the comments.

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