Brokers welcome ‘niche’ longer-term fixes


Intermediaries have praised lenders for launching more longer-term fixed rate deals, though argue they will remain a niche product.

Accord last week launched a ten-year fixed rate mortgage. It followed Skipton Building Society’s move to launch a seven-year fixed rate deal earlier in February.

Accord mortgage manager Ben Merritt says the appetite for longer-term fixes is on the rise, citing a 30 per cent increase in applications for five-year fixed rate remortgage deals during 2017.

He adds “This is unsurprising given the potential changes over the next 12 months, including possible bank rate rises and Britain preparing to leave the EU, which may be making borrowers nervous.

“No-one likes the unknown, so we felt it was an opportune time to give homeowners the security of knowing exactly what their mortgage repayments will be for the next ten years.”

How long is too long?

Gingko Independent head of mortgages James Mole says that for anyone not planning to move for a while it makes a lot of sense to lock into a long-term fixed rate while rates are low. 

He adds: “The great thing about the Skipton offering is the fact you only need a ten per cent deposit. Normally what you find with long fixed deals is that the maximum LTV the lender is willing to go to is something like 60 per cent. That leaves a large proportion of the market unserved, and I feel Skipton fills a void perfectly.”

White Financial Services managing director Daniel White says that while he can understand the appeal of such long fixed rates, in reality they will be best suited only to a very particular client type.

He adds: “There are too many life events and stages that occur for a client for a ‘long’ term fixed rate to be of any real benefit at every year of that fixed rate. If a client has ten or so years remaining on their mortgage and they are in a property for life then yes, maybe it’s a good fit.

Otherwise, five-year terms are as long as a client should fix without reviewing their circumstances, in my opinion.”

Just Mortgages group operations director John Philips argues that the increase in interest for five-year deals is due to the rates being low rather than a desire to fix for longer.

He adds: “It is not that brokers are not putting these type of deals forward – for those customers who are sure they will stay in their current property, they can offer a really good option – but when the broker explains the details, it puts people off. “

Serving a niche

L&C associate director of communications David Hollingworth says pricing will play a big part in the appeal of such long-term deals, suggesting they are at their most attractive when there is only a small price differential from five-year fixes.

He adds: “The couple of lenders offering seven-year deals have recognised that it could be something that fits with a certain niche of borrower. In addition some lenders like TSB have designed 10-year deals with a five-year ERC to counter the anxiety around locking in.

“However, although they are likely to remain something of a niche area it does show how the market is developing a broader choice to meet the needs of borrowers, dealing with higher household bills and the threat of higher interest rates.”

Xpress Mortgages mortgage advisor Rachel Lummis says her firm has not seen any demand for such long-term deals, though welcomes the fact borrowers now have  greater levels of choice.

She adds: “We do need to have a supply of these long term rates and hopefully more lenders will follow suit. These longer term products have not been readily available and so we will have to see how popular they become.”

Moneyfacts reports the interest rates charged on ten-year fixed rate deals has increased lately however. It notes that the current average rate on such deals stands at 3.05 per cent, compared to 2.96 per cent at the start of the month.

This is still lower than the average rate of 3.23 per cent on offer last August and the average 3.2 per cent available 12 months ago.


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