Borrowers are being offered the option of locking their mortgage repayments at the same level for up to 40 years with the launch of the longest fixed-rate deal on the market.
The lender Habito plans to launch a range of mortgages for borrowers with a 10% deposit that offers fixed-rate terms of up to four decades. The rates are based on the size of the deposit and how long the borrower wants to repay their mortgage.
Habito One mortgage rates start at 2.99% and are fixed for the full contractual term of the mortgage.
A range of loan to value (LTV) options for homebuyers from 60% LTV up to 90% LTV will be available from launch. Habito plans to roll out 95% LTV mortgages from early summer.
Someone taking the 40-year option with a 40% deposit, for instance, will fix at 4.2%, while a borrower with a 10% deposit will be offered a 5.35%. borrowing rate.
The mortgage will not have any early repayment charges during the duration of the mortgage, while monthly payments will stay the same during the lifetime of the mortgage.
Daniel Hegarty, founder and CEO of Habito, commented: “The mortgages we have available to us today are remnants of a different age and a different power dynamic between customers and lenders.
“The future has never been less predictable and we need our homes to provide us with safety and financial security.
“The vast majority2 of us on a mortgage that’s fixed for two to five years are effectively trapped in a system that doesn’t fit our financial future or our home-buying habits3. Worse still it demands that we continually switch to a new product before we get stung by a higher rate.”
The long-term fixed rate mortgage model is new for the UK but commonplace in some other countries, including the US, France and Denmark.
Kevin Roberts, director, Legal & General Mortgage Club, commented: “We should always welcome genuine innovation in the mortgage market and we welcome this initiative from Habito offering a fixed rate mortgage for as long as 40 years. Not only does the launch boost product choice for consumers, but long-term mortgages also have the potential to be a viable route for many buyers to help them achieve their housing ambitions.
“That said, borrowers have so far taken little interest in existing long-term fixed rate mortgages and it remains to be seen just how popular Habito’s new product will really be. Further information on Habito’s loan-to-income limits for these mortgages for example will also help to determine exactly which borrowers could benefit from these solutions.
“For many borrowers, a two- or five-year fixed rate mortgage may still prove to be more financially appealing in the short term and we would encourage those looking to buy or refinance to speak to an independent mortgage adviser and benefit from professional support.”