"A fixed for term mortgage - already very popular in some parts of continental Europe - is likely to become increasingly attractive in a rate rising environment."
Recent research from Kensington Mortgages reveals that 83% of homeowners and renters would consider a long-term fixed rate mortgage if it provided greater certainty of mortgage repayments.
To bring the product to market, Kensington has partnered with specialist pensions insurer Rothesay, who will provide funding.
Rates depend on the fixed term chosen and amount borrowed but are available up to 95% LTV for new purchases, or 85% LTV for remortgage, and start from 2.83% at 60% LTV for a 15-year term.
Rates on a 25 and 30-year term at 60% LTV are available from 2.85% and 2.90% respectively. Rates on a 25 and 30-year term at 95% LTV are available from 3.71% and 3.77% respectively.
Affordability is based on the fixed interest rate, not on a higher SVR stress rate and Kensington says many clients may therefore be able to borrow more as a result.
Kensington’s ‘Flexi Fixed for Term’ is also portable. The mortgage can be transferred to a new property and the rate and fixed monthly payment will remain the same.
Other benefit options include free legals and no product fees. Eligible gifted deposits are also accepted. No early repayment charges apply if moving home, selling, or a critical illness and/or death occurs. Overpayments are allowed up to 10% per calendar year of the original balance. If a client would like to borrow more money, they have the ability to apply for a further advance, with the option available after 12 months subject to affordability.
A 0.75% proc fee will be paid on completion to brokers, including mortgage clubs and networks.
Mark Arnold, CEO of Kensington Mortgages, commented: “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. A fixed for term mortgage - already very popular in some parts of continental Europe - is likely to become increasingly attractive in a rate rising environment.
“No two people or their circumstances are the same. 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. With one fixed monthly payment until the mortgage ends, extra borrowing power, and added flexibility for any life events that may happen, it is that simple.
"A long-term fixed rate mortgage may not always be suitable for everyone, which is why we’ve offered as much flexibility as possible with this product. For others, it could be the only way to afford a property. Our latest research found out that one-quarter of renters who attempted to purchase a home in the last five years were unsuccessful and of these, more than a fifth did not pass affordability checks and a quarter could not borrow as much as they needed. These products could be a serious alternative for getting people onto the property ladder who otherwise would be excluded."
Prateek Sharma, chief investment officer at Rothesay, added: “As the UK’s largest specialist pensions insurer, Rothesay is well-positioned to support these long-term loans which have an important role to play in the market. We are always looking for innovative ways to invest in long-term, secured and high quality assets, and firmly believe that these mortgages can provide the certainty that many borrowers are looking for. Through our partnership with Kensington, we’re pleased to support the Government’s ambition to make new types of mortgage products available which are purposefully designed to help increase home ownership while providing long-term security.”
Economic Secretary to the Treasury, John Glen, said: “I am delighted to see new products like this, and am always pleased to see innovation in the mortgage market in the UK. Greater product choice creates more competition and more options for consumers, in this case particularly those who value certainty in their repayments over a longer period of time.”
