With 10-year fixed rate mortgages costing as little as £7.40 per every £1,000 borrowed, or £518.00 a month on a typical £70,000 loan, there could be many new home buyers who will be sorely tempted by the new low rates. For the very cautious, who want the ultimate security of knowing how much their repayments will be for the full term of the contract, Bank of Ireland has brought out the first 20-year fixed mortgage. At £7.72 per £1,000 borrowed, monthly payments on a £70,000 loan would work out at £540.40 per month. (They will also allow you to hold on to the same rate if you trade up your house at any point, but you must take the new loan with B of I.)

There are a number of features which need to be considered before you opt for any fixed mortgage, but especially a 10- or 20-year one. The most pressing issue is the size of the penalty should you need to break the contract at any stage. Make sure the lender gives you a schedule of penalty charges from year one to years 10 or 20 - they should decrease as the capital owed decreases and its lending risk on the redeemed money is lessened. The other issue you need to consider is the size of the additional amount you will be paying for the security of the fixed rate: if the variable rate for two years is just £6 per £1,000 borrowed or £420 a month on a £70,000 mortgage, and you are paying £518 a month for the same two years because you have taken out a 10-year fixed contract, you will have paid £2,352 more than if you had opted for a variable rate loan.

This is quite a lot of money, especially in the early years of home ownership and might be a rather high price to pay for longterm payment security. Against that, it must be said that no one can predict how interest rates are going to move, except to say that they will. Inflation will also eat into a £540-a-month payment over 20 years, making it considerably less to pay in real terms. Finally, make sure you ask your lender just how flexible it is prepared to be over the long term: is it offering the new flexi-terms that are becoming increasingly popular and which allow for payment holidays, accelerated payments and drawdowns. Would it consider capping the long-term rate rather than fixing it? This might allow you to enjoy rate decreases. Check if it is throwing in any free insurance cover or discounted personal loan or motor loan rates.