Habito launches 40-year fixed-rate mortgage in 2021

  • Habito Mortgage Broker’s unveils UK’s longest-ever fixed-rate mortgages to tempt buyers
  • UK lenders resume 5% mortgage deposit scheme following UK Chancellor Rishi Sunak’s Budget 2021
  • Number of mortgage deals for first-time buy-to-let landlords increases
  • Chancellor Rishi Sunak extends the eviction ban for renters

UK homebuyers will have access to a broader range of mortgage options this month following the slump caused by the Coronavirus pandemic.

According to the independent mortgage monitor Moneyfacts, there are 3,532 products on offer – the highest number of available mortgage options since the pandemic gripped Britain in March 2020.

Data from Moneyfacts has also revealed that mortgage availability rose for the fifth successive month in March, with 1,120 more products on offer since October last year.

However, the financial information company noted that the average shelf life for all mortgage deals has plummeted to the lowest levels recorded since May 2017 and deals with a high loan-to-value (LTV) are sparse.

Yet, UK homebuyers will be relieved to know that lenders are beginning to offer more risky loans as we turn the tide on the pandemic.

New lender, Perenna is offering simple, consumer-friendly mortgages with fixed repayment periods up to 30 years, 95% LTV and 5% mortgage deposits.

Meanwhile, Habito has just launched the UK’s longest-ever fixed-rate mortgage, with fixed repayments up to 40-years. The broker offers several other mortgage options with deposits from as little as 10%.

These mortgages, which are being plugged as a solution to affordability amid surging house prices, will help borrowers with small deposits onto the property ladder.

stamp duty holiday

What are Habito’s 40-year fixed-rate mortgage terms?

Mortgage broker Habito has said its new longest-ever fixed deal, the “Habito One”, will be available to first-time and existing UK borrowers, as well as those looking to refinance their mortgage from March 15th.

According to Habito, their new mortgage offers UK homebuyers fixed repayment periods between 10 and 40 years with interest rates starting from 2.99%, compared with average rates of 1.28% on a best-buy five-year fixed terms.

One broker told MoneySavingExpert.com that this is the first time they have seen a 40-year fixed-rate mortgage, noting that the fixed period is usually five years, although it’s possible to receive fixed terms up to 15 years – albeit this is rare.

Here are the terms for Habito’s new 40-year fixed-rate mortgage:

  • No early repayment charges or exit fees, meaning borrowers can switch to another deal at any point and pay off their debt early.
  • The product is not available to the whole of the UK – only borrowers in England and Wales
  • UK homebuyers can only access the mortgage deals directly through Habito
  • Borrowers who opt for longer fixed terms will have to pay higher interest rates
  • A one-time fixed product fee of GBP 1995 will apply at all LTV levels
  • Borrowers will be able to pay 5% mortgage deposits in the summer

According to Habito, UK borrowers can secure the fixed-rate at the beginning of their term, meaning a homebuyer that locks in the 40-year deal when it launches would have that rate guaranteed until March 2061.

Founder and Chief Executive of Habito, Daniel Hegarty, said that they decided to introduce the 40-year fixed-rate option as the pandemic has made our futures more unpredictable, and we need “homes to provide us with safety and financial security.”

He added that the mortgage options available today reflect an age that has past and that “the vast majority of us on a mortgage that’s fixed for two to five years are effectively trapped in a system that doesn’t fit our financial future or our home-buying habits.”

Mr Hegarty implied that Habito’s new mortgage deals better serve the new age of borrowers and prevent the constant switching of deals, which are often costly, laborious, and exhausting.

According to a recent survey conducted by the London-based lender, 75% of participants said they would like to have the option to do more with their home finances within the next six months but cannot remortgage as their current deals tie them down.

However, that’s not to say that you’ll be missing out if you don’t secure a mortgage deal with Habito, as the company’s interest rates are relatively high compared to other lenders.

While mortgage rates are already at historic lows, there’s also the chance that they will decline further in the future, meaning you could potentially miss out on lower repayments.

Although Habito doesn’t penalise borrowers for withdrawing, we advise doing your research before locking in any agreement.

Holiday let mortgages are being reintroduced in the UK amid easing of lockdown restrictions

What is the best way to secure low rates on fixed-mortgages?

While mortgage and refinance rates are at all-time lows, the rates on higher loan-to-value mortgages have increased over the past year.

Although most property market insiders expect mortgage and refinance rates to remain low this year, it might be wise to lock in a low rate on a fixed-rate mortgage relatively soon if you’re considering purchasing a home.

According to Moneyfacts, the average two-year fixed-rate 95% LTV mortgage has increased from 2.57% on March 8th 2020, to 3.52% year-on-year.

Meanwhile, the average two-year fixed rate for all loan-to-value products at 2.58% is at its highest level since mid-2016.

With the stamp duty holiday being tapered down until September-end, those looking for new deals or processing applications should secure advice and up-to-date knowledge from a qualified industry advisor.

To ensure you secure the best possible rates, we suggest considering the following:

  • Improving your credit score before making an application – if you’re a responsible, reliable borrower and your history proves that you can pay off debt, you have a better chance of being accepted for a mortgage at better rates.
  • Saving more for your deposit – while most UK lenders are reintroducing 5% mortgage deposits, you’ll likely access lower rates if you put down a larger
  • Reducing your debt-to-income (DTI) ratio – if you’ve got a significant amount of debt, pay this off before making a mortgage application to increase your available income.

Carrying out those mentioned above will help ensure your finances are in good shape. However, borrowers facing financial hardship will be glad to know that most lenders are now offering 95% mortgage guarantees, meaning you can get on the property ladder with a 5% deposit.

UK lenders reintroduce 95% mortgage guarantee

UK Chancellor Rishi Sunak announced some positive news for UK homebuyers in his March Budget statement – an extension to the revered stamp duty holiday and a new government-backed 95% mortgage scheme.

As the government will act as a safety net and take on some of the risks of low deposit loans, this has incentivised lenders to reintroduce the 5% mortgage deposit scheme.

Prospective buyers and home-movers who had been unable to save a 10% deposit to access home loans can now secure property with as little as 5% of the property’s value.

Given that saving rates have decreased by seven-tenths following the Bank of England’s (BoE) decision to slash interest rates to unprecedented lows, the low deposit loans will be welcomed by many UK borrowers.

With confidence rising, lenders are also introducing more mortgage options for landlords, which has enticed more people to enter the buy-to-let sector.

Buy-to-let mortgage options

Mortgage options for buy-to-let landlords have increased

Over the past 12 months, there has been a rise in first-time buy-to-let mortgages. Low-interest rates and the stamp duty holiday has increased competitivity among lenders, and the latest offerings have brought new landlords into the market.

According to recent data, the number of buy-to-let mortgage deals has risen from 61% to 65% over the last year. The availability of products is expected to continue climbing as the stamp duty holiday extension has renewed confidence in the UK property market.

Reduced saving rates also make the UK an attractive investment destination, encouraging new landlords to enter the market.

Residential tenants will also be glad to know that landlords will not be able to force them out of their homes until May-end after Chancellor Rishi Sunak extended the COVID eviction ban.

Landlords are required to provide tenants with six-month notice unless incidents of fraud or domestic abuse occur within their premises.

Richard Lane, StepChange director of external affairs, commended the UK government’s decision to extend the eviction ban and said, “it is a welcome step which will give renters affected by the pandemic vital time to get back on their feet.”

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