Longer term fixed rates have been “missing from the landscape for some time”, according to some brokers, after a smaller lender stepped up to offer these products.
April Mortgages is the latest provider to offer long-term fixed rates of between five and 15 years.
Contractor Mortgage Services director, Ken James, said lenders, such as April, who are now providing these longer-term mortgages are “filling in a potential gap” in the market.
“Not every client is going to want a long-term fix, but if lenders like Perenna and April are able to support higher lending limits due to the security of a longer term fixed period then it may entice some to the table,” he added.
He pointed out that Virgin is entering this space with 10-year fixed rate cashback options, incentivising buyers to make energy-efficient upgrades to their homes.
“Choice is a good thing as long as it’s clearly explained to borrowers and they fully understand what it is they are taking onboard,” he concluded.
A similar sentiment was shared by The Mortgage Stop director, Rohit Kohli, who said: “We see a lot of interest from borrowers in these long-term fixes.”
However, he acknowledged that, in a market where rates are expected to fall, “when we discuss the numbers they tend to get put off”.
He added that the products themselves have a place in the market where lenders will offer to lend more for a long-term commitment and don’t have unreasonable penalties for existing after the initial period.
“April Mortgages have certainly listened to feedback on things like LTV by giving borrowers improved rates as they build equity in their homes,” Kohli additionally stated.
“More of this type of innovation and development and I’m sure long-term fixes will grow in popularity.”
Praise was also offered by EHF Mortgages managing director, Justin Moy, who said innovation is “high on the wish list” of both borrowers and brokers and so any new-styled mortgage product is a “welcome addition” to the usual range of options.
“How popular these mortgages products prove will be really interesting to monitor given that current rate improvements will typically encourage short-term deals.
“There is definitely a space for this kind of mortgage, possibly due to enhanced affordability as much for those worried about longer-term rate increases, or even changes in government.”
Additionally, The Kushman Group property developer and portfolio landlord, Kundan Bhaduri, said: “It beggars belief that in Britain we do not seem to have too many choices for long term mortgage fixes beyond a 5-year term.”
Limitations
However, Orchard Financial Advisers managing director, Ben Perks, cautioned: “There are so many circumstances that can change in a 15-year period, so it is difficult to envisage many clients for whom this will be an attractive option.
