Mortgage innovation update..
Lender launches fixed rate mortgages for up to 40 years!
Pebble Financial is pleased to explain to you some recent innovation to the UK mortgage sector.
At what has been a very turbulent time over the last couple of weeks in the mortgage market, this week sees the launch of a range of long term fixed rate options. This ‘Flexi Fixed for Term’ range allows borrowers to fix the rate on theirmortgage for the full termof the loan which can be anywhere from 11 to 40 years.
Our opinion based on recent discussions with clients suggests that given current market conditions many would considera longer term fixed rate. This innovative range of products fills what has been a void in the UK mortgage market untilnow.
The rates available depend on the duration and repayment term of the proposed mortgage, for example a repayment term of 20 years would provide a fixed rate for this full 20 years. The interest rates are tiered and depend on the repayment term of the loan. These deals are currently availableat up to 85% loan to value for purchasers and 85% loan to value for remortgage borrowers.
What is also a major benefit to the way these mortgages work is that the affordability calculations (which determine the maximum loan amount available to a borrower), is based on the actual fixed rate and not on a higher standard variable rate stress test.
This can result in borrowers being able to borrow more as a result compared to a shorter term fixed rate mortgage.
Other benefit options include free legal fees and no product fees. No early repayment charges apply if moving home, selling or if a ‘life event’ such as diagnosis of a critical illness or death occurs during theterm of the mortgage. If additional funds are required at a later stage the option is available after the first 12 months subject to affordability and underwriting.
Why this is so relevant and timely in its introduction to the UKmortgage market is that over the last 12 years we have become very used to what have been ultra low interest rates. There are many UK homeowners who have never experienced the higher interest regime that we have gradually been moving in to and this has become a shock as the cost of theirmortgage has or will increase. Nothing lasts forever and it is looking more likely that we are going to see further interest rate rises.
Our view is that a fixed for term mortgage, which is already very popular in some parts of Europe and the US, is likely to become increasingly attractive in a rising interest rate environment.
The below provides avery brief summary of the benefits and the range of current rate options:
Flexi Fixed for Term is a capital repayment residential mortgage that lets borrowers fix theirmortgage from 11 to 40 years with a fixed monthly payment that willnever change
Greater borrowing power as affordability is calculated on the initial fixed rate rather than a future variable stressed rate. Up to 4.49 loan to income multiple for all borrowers.
No early repayment charges for ‘life events’ (explained below).
Up to 85% LTV • For first time buyers, homemovers and remortgagers
For repayment terms between 11 and 15 years
Rates from 4.07% fixed for term of mortgage with £1,499 fee
Rates from 4.29% fixed for term of mortgage with £0 fee
For repayment terms between 16 and 20 years
Rates from 4.09% fixed for term of mortgage with £1,499 fee
Rates from 4.28% fixed for term of mortgage with £0 fee
For repayment terms between 21 and 25 years
Rates from 4.10% fixed for term of mortgage with £1,499 fee
Rates from 4.26% fixed for term of mortgage with £0 fee
For repayment terms between 26 and 30 years
Rates from 4.15% fixed for term of mortgage with £1,499 fee
Rates from 4.30% fixed for term of mortgage with £0 fee
An example cost of the credit is shown below with the various risk warnings.
Early redemption charge waivers - no charges incurred upon:
Voluntary sale of the property/moving home (all life circumstances)
Redemption in fulland financed by own funds
Death or Critical Illness
Overpayments up to 10% per calendar year (of the original balance)
Early repayment charges would apply if the loan is repaid using money borrowed from another lender.
Representative example:
Example cost of credit based on a loan of £250,000 against a property valued at £450,000 over a repayment term of 20 years. The interest rate in this example is the rate of 4.09% with the lenders scheme arrangement fee of £1,499 being added to the loan balance:
Interest rate is 4.09% fixed for 20 years
Monthly repayment ofcapital and interest is £1,536
Total amount of credit over 20 years is £369,101
The APRC is 4.26%
Repayment term is 20 years
Total instalments 240monthly repayments
As with all mortgages, it is important that you understand the full terms and conditions prior to making any decisions. As whole ormarket, independent financial advisers, our team of advisers at Pebble Financial will be pleased to work with you to explain all your options.
If you are considering purchasing or remortgaging yourhome, please contact us on 01273 525080 or emailinfo@pebble-financial.co.uk. We will be pleased to discuss your circumstances and objectives and advise on all options available to you. An initial consultation is free and without obligation.
There will be a fee for mortgage advice. Our charges are usually £399 for advice and arrangement on a mortgage. The precise amount willdepend upon your circumstances and the complexity of the work required.’
Our website can be found at www.pebble-financial.co.uk.
Your property may be repossessed if you do not keep up repayments on a mortgage or any debt secured upon it.
Email: info@pebble-financial.co.uk www.pebble-financial.co.uk Office: 01273 525080
Pebble Independent Financial Services Ltd 136 Beach Green Shoreham by Sea BN43 5YA
Pebble Independent Financial Services Ltd is an appointed representative of Best Practice IFA Group Limited which is authorised and regulated by the Financial Conduct Authority
Registered in England, number 05861771, registered office Suite 20 Adur Business Centre, Ropetackle Little High Street, Shoreham-By-Sea, West Sussex, BN43 5EG
The data above is correct as of 7 October 2022.
Your property may be repossessed if you do not keep up repayments on a mortgage or any debt secured upon it.
Pebble Independent Financial Services Ltd isentered on the FCA register (https://register.fca.org.uk/) under reference 454387
The Financial Ombudsman Service is available to sort out individual complaints that clients and financial services businesses aren’t able to resolve themselves. To contact the Financial Ombudsman Service, please visit www.financial-ombudsman.org.uk.
The guidance contained within this article is subject to the UKregulatory regime and is therefore targeted at consumers based in the UK.
There will be a fee for mortgage advice. Our charges are usually £399 for advice and arrangement on a mortgage. The precise amount will depend upon your circumstances and the complexity of the work required.’
Pebble Independent Financial Services Ltd act as credit brokers when offering mortgage advice and is not a lender.
This is intended for the purpose of providing information onlyand should not be deemed to represent specific advice.