Latest Mortgage News, September 2017
All the latest news, rates and need-to-knows from the mortgage world from our consumer journalist Christine Toner
A mortgage for life?
A mortgage is for life, not just for Christmas may not have the same ring to it as the famous pet campaign but lifelong loans may well be becoming a reality. In its quarterly consultation paper the Financial Conduct Authority (FCA) proposes bringing back retirement interest only mortgages which would essentially mean borrowers could have a mortgage for life and just pay the interest, with the capital repaid when they die or move into care. The move, says the regulator, will offer a solution to those borrowers stuck with interest-only mortgages approaching the end of their term who don’t want to take on an expensive equity release plan (known as a lifetime mortgage).
“Retirement interest-only mortgages have significantly different risks compared to lifetime mortgages,” says the paper. “In particular, they do not feature the roll-up of interest, meaning that consumers are not at risk of rapid equity erosion and the subsequent reduction of funds available for a bequest. Consumers are also more likely to be familiar with the product features of a mortgage involving interest payments. However, we do consider that there are some risks associated with lending with no fixed term and we are proposing to add a small number of additional requirements for the sale of these loans.” The consultation period for this proposal will last for two months. Watch this space.
In the meantime, check out our guides on mortgages for the over 50s and equity release
The long and the short of it
And while the mortgage industry may be looking towards lifelong loans it seems borrowers are certainly up for taking out mortgages for longer. According to a report in the Daily Mirror, one in four first time buyers are taking out a mortgage that will last 35 years or more.
The newspaper says 28.1% of mortgages taken out by first-time buyers in 2016 were for a term of 35 years or longer. In the first quarter of 2017 that figure has risen further to 30%, up from just 13.8% in 2006, according to figures released following a Freedom of Information to the FCA.
Confused about mortgage terms? Read our Mortgages Made Simple guide
Save a little harder for big rewards
For most people looking to buy a house raising the deposit is the biggest hurdle to get over. So there’ll be plenty of would be buyers who’ll rejoice at the news that the number 90% LTV loans on offer is approaching an all time high. Financial data firm Moneyfacts says the number of mortgage products on offer increased by 107 in September to 4,764 with 687 mortgages available at 90% LTV, up from 649 last month.
The current record for high LTV loans is just 21 products higher at 708 (which was achieved in April 2008).
We’re unlikely to see the same number of 95% mortgages that we saw before the financial crisis however as this month saw a slight downturn in the 95% LTV tier, with the number of mortgages available falling by six on a monthly basis to 270.
Rachel Springall of Moneyfacts says: “The rates on offer for those with a 10% deposit versus those with just a 5% deposit couldn’t be more different. By raising an extra 5%, borrowers will find it opens the door to more choice of cost-effective deals. As the number of deals in this market hit a post-crisis high, it’s clear to see how lenders are competing in this area, which was previously seen as a much more risky.”
Kindly shared by Home Owners Alliance