Its ‘Flexi Fixed for Term’ mortgages will allow borrowers to fix the rate paid on their mortgage for the full term of the loan which could be anywhere between 11 and 40 years
UK lender Kensington Mortgages is to launch fixed-rate mortgages of up to 40 years on Tuesday in what will be one of the first products of its kind in the UK market.
The lender has partnered with Rothesay to finance the longer-dated mortgages.
Rothesay is the UK’s largest pensions insurance specialist which has more than £60 billion in assets.
Its “Flexi Fixed for Term” mortgages will allow borrowers to fix the rate paid on their mortgage for the full term of the loan which could be anywhere between 11 and 40 years.
The long-term mortgages come amid concerns about rising inflation and increasing expectations that the Bank of England (BoE) will need to raise interest rates to tackle it.
Mark Arnold, chief executive at Kensington Mortgages, said that while many homeowners had never known anything but ultra-low interest rates, the environment was likely to change.
Nothing lasts forever and it looks very likely that we will see a succession of interest rate hikes and we may begin to slowly approach again an historical average, he added. A fixed-for-term mortgage — already very popular in some parts of continental Europe — is likely to become increasingly attractive in a rate-rising environment.
Rates will depend on the fixed term chosen and amount borrowed. A 95 per cent loan to value (LTV) mortgage will be available for new purchases and 85 per cent LTV for remortgage.
For the longest-dated mortgages of 35 years and 40 years, rates will start at 3.16 per cent and 3.34 per cent respectively, at a 60 per cent LTV. Rates at the shorter end of mortgage terms will be lower — starting at 2.83 per cent for a 15-year product at the same LTV. For 25 and 30-year terms, rates will be available from 2.85 per cent and 2.90 per cent respectively.
Lengthening the traditional fixed-rate mortgage is a stated priority of the UK government and would break with the trend of switching deals every two or three years.
John Glen, economic secretary to the Treasury, welcomed the development. Greater product choice creates more competition and more options for consumers, in this case particularly those who value certainty in their repayments over a longer period of time, he said.