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Conservatives vow to introduce lifetime fixed rate mortgages

The Conservative Party has pledged to introduce ‘lifetime’ fixed rate mortgages for renters with a 5% deposit.

The party would use funding from institutional investors like pension funds to support the move.

There was also a pledge to offer local first-time buyers a 30% discount.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “It feels as though we have travelled back in time to 2004 and the Miles report which recommended lifetime mortgages.

“As with any party manifesto, there is very little detail. For those people seeking their last move or last mortgage, it may be a suitable product but for most it is unrealistic and unworkable due to any number of life events that can occur and changes in requirements.

“Tellingly, there is no detail as to how it will be funded. As we know, pricing is dynamic, so what happens if someone fixes at the top of an interest rate cycle? Will there be exit costs to pay? Even relatively longer-term products such as 10-year fixes, have not seen a great take-up due to the implications of fixing for the longer term.

“Affordability tends not to be the issue for borrowers when interest rates are low, as rents are typically higher than equivalent mortgages. For most, the deposit is the greater issue, which is why the Bank of Mum and Dad has become so important.”

Neil Cobbold, chief operating officer of PayProp, said: “As with all new policies announced without significant detail, the government’s pledge to introduce Lifetime Rental Deposits raises more questions than answers.

“The major questions revolve around whether landlords will be offered the same level of protection as with the traditional deposit system, how deductions for damage would work and what would happen to a tenant’s Lifetime Rental Deposit if they chose to rent a property with a higher or lower value of deposit.

“With the recent growth of the no-deposit sector in mind, it must be considered whether a complete overhaul of the deposit system is necessary as tenants already have a low-cost alternative to upfront security deposits.

“Moreover, the rental sector is still adapting to the deposit cap introduced as part of the Tenant Fees Act earlier this year, so further deposit reform could cause confusion among letting agents, landlords and tenants.

“It will also be interesting to see if the plans to introduce Lifetime Rental Deposits will tie in with the government’s plans for digital transformation of the property sector through an expert advisory council.”