40-year Fixed Rates
Lee Langley is the Principal Mortgage and Protection Adviser at OnPoint Mortgages. In this article, he talks about products that allow 40-year fixed rate mortgages in the UK.
As fellow Qandor member Dylan Mitchell of Worldwide Property Company will tell you, long-term fixed rate mortgages are very common and popular in continental Europe. Here in the UK, however, most lenders generally only offer fixed mortgages up to 5 years for home mortgages, with a few such as Nationwide and TSB going up to 10 years. Ten-year fixed rates with TSB have been available with only 5-year tie-in penalties, a nice feature. Longer fixed for term mortgages have been scarce; however, that is until Habito shook up the market in March 2021 with their Habito One product. This allowed you to fix your mortgage for 10, 15 or even up to 40 years.
This product did not kickstart a trend until Kensington launched their Flexi Fixed for Term deals in November, allowing borrowers to fix their monthly payment for between 11 and 40 years. The rates vary depending on the term chosen and are available up to 95% LTV for purchases and 85% LTV on remortgages. The stability of the rate means the affordability assessment is calculated on the fixed rate itself rather than a higher standard variable stressed rate, meaning applicants can potentially borrow up to 6 times their income, a potentially welcome benefit for first-time buyers after a year of property values increasing.
Forty years is of course a long time, but Kensington have built flexibility into the product. It is portable, meaning you can transfer the mortgage to another suitable property if you move home. In addition, you can overpay up to 10% of the original balance per annum and the early redemption penalties do not apply if a critical illness or death occurs. Subject to affordability you can also apply for a further advance after 12 months.
Kensington partnered with pensions insurer Rothesay to bring forth this product. Kensington Chief Executive Mark Arnold said, “Over the last 12 years we have become accustomed to ultra-low interest rates. Many homeowners have never known anything else. But nothing lasts forever, and it looks very likely that we will see a succession of interest rate hikes and we may begin to slowly approach again an historical average. Whether you’re a first-time buyer or homeowner wanting an affordability boost, a self-employed worker worried about remortgaging, or someone wanting greater certainty on monthly repayments – our new Flexi Fixed for Term can help.”
This product won’t be suitable for everyone. You could end up paying more interest overall, as usually the longer the fixed rate, the higher the interest rate. What these products absolutely do, however, is add another innovation into the market, which is great news for consumers battling inflation and concerned about rising interest rates.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Some forms of buy to let mortgages and some forms of commercial lending are not regulated by the Financial Conduct Authority.
Lee Langley is the Principal Mortgage and Protection Adviser at OnPoint Mortgages. OnPoint Mortgages a trading style of L&D Mortgages Limited is an appointed representative of The On-Line Partnership Limited which is authorised and regulated by the Financial Conduct Authority. Registered address: 25 Homefield Road, Bushey, Hertfordshire, WD23 3AP. Registered in England & Wales under 10500099