The 40-year mortgage: The sign of things to come?
From today, online mortgage brokers Habito will be launching the UK’s first 40 year fixed rate mortgage. Named the “Habito One’, the mortgage will give buyers access to long-term fixed rate periods from 10 years, right up to 40 years. The rates will start at 2.99 percent, fixed for the full term of the mortgage.
Quite uniquely, it will come without the early repayment charges or exit fees that you normally see with traditional fixed-term mortgages from high street banks. In doing so, Habito hopes the new mortgage will allow buyers to “lock in” their rate whilst being able to maintain “complete flexibility and freedom over their home finances”.
Longer mortgage repayment period
Historically, mortgages have been arranged over 25-30 year periods; however, as affordability tests become more rigorous and house prices continue to rise faster than average household earnings, it’s meant that borrowers are having to extend their repayments over a longer period of time. In addition to this, fixed rate mortgages were traditionally locked in at an attractive rate for the first few years of borrowing, requiring homeowners to constantly keep track of whether they are on the best available rates and switch to a cheaper rate once the introductory rate expired. For anybody not tracking their finances like a hawk, this could save buyers considerable sums of money in the long term.
Interest Rates deterrent
For customers of the Habito One mortgage, the interest rates will be fixed for a term from 10 to 40 years, with the longest terms paying the highest rate. For a 10 to 15 year term mortgage on a 40% deposit, the interest rate will be 2.99% compared with a rate of 1.28% on the best five-year fixed rate offerings. With no early repayment charges, customers will be more flexible around switching to a new mortgage or paying off their debt early. This is crucial because, with no penalty for early repayment, this offering has a level of flexibility that is not associated with long term deals.
Predictable yet flexible
This new long-term offering will provide homeowners with long-term predictability around their financial outgoings, which could be particularly valuable for those who expect to hit retirement age before they pay off their mortgage. This predictability has traditionally not come with flexibility, with people often being locked into long-term mortgages due to high exit fees. This isn’t the case with this new offering, providing the best of both worlds to buyers.
Currently, the offer will be available with a minimum 10% deposit but from early summer, the offer will be extended to those on a 95% loan to value (LTV) mortgage. If you are thinking about buying, why not check out thousands of properties we have for sale using our intelligent property search platform.