Last week saw the launch of a mortgage potentially fixed for 40 years.
Habito, which started life as a technology-driven mortgage broker, is very much looking to make a splash in the lending game with the product, named Habito One.
Products start from 2.99% to 60% LTV fixed for 10-15 years, all the way to a 36-40-year fix to 90% LTV, which is currently priced at 5.35%.
So can these long-term fixed rate mortgages have much of an impact?
I think they have potential, but unless they’re priced at a cheaper rate I’m not sure they’ll be much of a game-changer.
To be fair they’re hard to price – if you make them too cheap what happens if interest rates significantly rise in the next 40 years?
It’s different in the US, where 30-year mortgages are common, as mortgages are insured against defaulting by the government’s Federal Housing Association.
Speaking of rate, I also worry about a potential conflict of interest at Habito. If the company is giving advice as a broker it’s likely products from the other ‘big six’ mortgage lenders will be cheaper than what it’s able to offer via these long-term products – so when can they be offered fairly?
That’s not to say I’m entirely pouring scorn on what Habito is trying to achieve, which appears to be doing away with standard variable rates altogether and the constant need to remortgage.
This is something that’s definitely annoying. It’s like having to switch your internet provider or pretend you’re leaving your phone contract every two years to get a fair deal. But unless a product like Habito’s is competitive, going for the traditional option of remortgaging every two or five years will still probably be more suitable for people despite the associated pain.
It should be noted that Habito isn’t the only institution looking to bring a long-term fixed rate product to market in the UK, as Perenna says it’s aiming to offer a 30-year fixed rate mortgage, which will allow borrowers to switch if they wish after five years.
I’m unsure these products will have much of an impact – but I wish both businesses well. I met Habito CEO Daniel Hegarty some time ago and I was impressed with his vision of improving the homebuying journey, so it’s a development I’ll follow closely.
On a different subject, I have an announcement to make.
Having steered the ship since late 2019, I’m afraid I’m departing from PropertyWire to a new publication.
While some messages in my inbox have been less complimentary than others in the past year, I’ve appreciated your engagement during my time as Editor.
With journalists and readers it’s very much a two-way street, as we look to report on issues that concern you. So thanks, and all the best to my successor.
Ryan Bembridge
Editor
PropertyWire
