Lloyds Bank launches cheapest mortgage on record: but is it right for you?

Lloyds Bank has launched the cheapest 10-year mortgage the UK has seen since records began. Here’s a look at whether it could be right for you.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Home key with house keyring with calculator.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Lloyds Bank has launched the cheapest 10-year mortgage the UK has seen since records began, according to a report in The Telegraph.

The low-cost mortgage has a fixed interest rate of 1.66% and comes at a time when UK homeowners face rising energy costs and increased living expenses. But is a 10-year commitment right for you? Here’s a closer look at the detail behind the headline.


What is the Lloyds Bank fixed-rate mortgage deal all about?

According to brokers, it’s the lowest fixed-rate deal ever seen on a 10-year mortgage. Previously, the cheapest mortgage on record was offered by TSB (1.74%). The lowest rate ever offered by Lloyds was previously 1.99%.

However, the 1.66% offer isn’t available to all home buyers – it’s only open to those remortgaging. You’ll also need a 40% deposit (at least) and pay a £1,000 fee.

But that’s not all. You’ll face a 6% early exit penalty if you want to leave the deal within the first five years. According to mortgage brokers, this is higher than average. You can still be penalised after five years, but you’ll be charged according to a sliding scale.

Who else offers cheap 10-year mortgages?

A number of lenders have introduced or lowered rates on their 10-year mortgages.

Halifax has just launched a low-cost 10-year mortgage at 1.68%. The mortgage is available to anyone moving home. However, you’ll need a minimum 40% deposit and have to pay a £999 fee. If a 40% deposit is too high, a 25% deposit makes you eligible for a 1.77% 10-year fixed-rate mortgage (plus the £999 arrangement fee).

Leeds Building Society also offers two 10-year fixed-rate mortgages, one at 2.08% (up to 65% loan-to-value ratio) and another at 2.14% up to 75% LTV. 

The flurry of 10-year fixed mortgages reflects an increase in interest from homeowners and home buyers. In fact, according to tech firm Twenty7Tec, searches for 10-year fixed-rate mortgages rose by 70% at the end of January. 


Is it worth fixing your mortgage for 10 years?

If you’re remortgaging or looking to move, these offers look enticing. After all, some mortgage brokers and analysts are predicting that by the end of the year, interest rates could increase five times. That potentially means a typical mortgage could rise by more than £1,000.

With that in mind, locking in an ultra-competitive 10-year fixed rate looks like a good deal, right?

Well, don’t forget that by its nature, a 10-year mortgage lacks flexibility, and you’ll pay hefty penalties if you want to switch lenders. You’re also likely to face fees if you want to pay off your mortgage earlier than scheduled too. Plus, if interest rates fall, you won’t benefit from any reductions as you’ll be tied in for the remaining mortgage term.

Ultimately, whether a 10-year mortgage is right for you really depends on your personal circumstances and your appetite for risk. While there is definitely less flexibility in a 10-year mortgage compared to a two- or even five-year mortgage, it could protect you from increases if interest rates soar in the short term.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »