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"We could see demand for longer-term fixed deals spike"

ended 25. September 2024

With Nationwide extending its maximum LTI from 5.5x to 6x, Newspage asked brokers if we are likely to see more high street lenders follow suit.

In the words of Elliott Culley, director at Switch Mortgage Finance: “House prices are still rising and the loan to income ratio gap will continue to stretch as time goes on. Higher LTI products are very popular with first-time buyers and it is no suprise to see other lenders joining the party with enhanced LTIs. Lenders are looking for more business and realise they can open the door for many other first-time buyers with these changes.”

Meanwhile, Scott Taylor-Barr, Principal Adviser at Barnsdale Financial Management, said: “We could see demand for longer-term fixed deals spike when people feel that interest rates are towards the bottom of the cycle, as they want to lock in for as long as possible at a low rate, before they jump up.”

Mark Eaton, COO at Dutch-style lender, April Mortgages, also welcomed the Nationwide move: “It’s great to see more lenders increasing their maximum loan to incomes. This is the flexibility that longer term lenders can offer and a flexibility that is helping more homeowners onto the property ladder. House prices are high but longer term fixed rates can mean higher maximum loan to incomes, which means more help for more borrowers. The high street is slowly shifting towards longer term fixed rates, which are an increasingly popular proposition in today’s market.”

But Dariusz Karpowicz, Director at Albion Financial Advice, cautioned: “There might be some customers that will use these longer-term products, but let's be honest: rate is still king when it comes to making decisions."

The views of 8 brokers are below.

8 responses from the Newspage community

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David Stirling
Independent Financial Advisor at Mint Wealth
Flexbility and innovation in mortgage products will need to continue to keep pace with modern requirements, such as lending to age 80+ to cope with rising housing costs. New lenders such as April and Perenna are pushing boundaries with longer term fixes, with Perenna offering up to a 40-year fix. These mortgages are portable so clients would not necessarily face a penalty if they wanted to move house and the ERC period ends after five years. Although slightly quirky, these types of products will be suited to younger buyers who can take advantage of these new features.
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Elliott Culley
Director at Switch Mortgage Finance
House prices are still rising and the loan to income ratio gap will continue to stretch as time goes on. Higher LTI products are very popular with first-time buyers and it is no suprise to see other lenders joining the party with enhanced LTIs. Lenders are looking for more business and realise they can open the door for many other first-time buyers with these changes.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
The longer the length of the deal, the more flexibility it needs to be attractive to borrowers. Traditionally, people would shy away from fixing for longer than 5 years, as the risk soon outweighed the benefits in customers' minds, they could see ahead and plan for a 5-year period with some degree of certainty, but 10-years, or 15-years? It simply felt like guess work and the thought of having a large financial penalty if you got that guess wrong was simply too great, especially if the loan available on a 5-year deal isn't increased by fixing for longer. Fixed rates with extra flexibility change that risk/benefit calculation; if you can make overpayments, move house and do so without incurring a few thousand pounds of early repayment charge, then they become more appealing. We could see demand for longer-term fixed deals spike when people feel that interest rates are towards the bottom of the cycle, as they want to lock in for as long as possible at a low rate, before they jump up.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
Many buyers will still be wary of super-long fixes such as 10 years, but the larger affordability boosts make a 5-year fixed option for medium term stability a very attractive option compared to being able to borrow much less on a corresponding 2-year fixed rate. With 5-year fixed rates also being competitively priced and no guarantee rates will drop quickly and by how much over the next few years, these medium term fixed rates are becoming popular unless a client has a need for short term flexibility.
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Adam Stiles
Managing Director at Helix Financial Partners
There is no question that there is a need for longer term fixed products especially with how volatile rates have been and how fast they have increased. Many people have been caught out having got used to a decade of cheap money and needing to be weaned off. More than anything it gives people peace of mind and the ability to sleep at night which to many is worth a lot to most. Whether or not it was the right thing to do requires either a crystal ball or hindsight, but there is without question a market for this type of product.
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Dariusz Karpowicz
Director at Albion Financial Advice
There might be some customers that will use these longer-term products, but let's be honest: rate is still king when it comes to making decisions. However, if wages don't keep pace with rising house prices, we could start seeing lenders offering mortgage terms stretching long into retirement. Flexibility is great, but affordability will always be the driving factor for most buyers. It’s possible that more and more borrowers, especially younger ones, will opt for these future-proof products, but only if the price is right.
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Gabriel McKeown
Head of Macroeconomics at Sad Rabbit - Substack Newsletter
In the race for homeownership, lenders are pushing the boundaries of what's possible, with Nationwide's latest gambit potentially sparking a lending revolution, turning 'Generation Rent' into 'Generation Own'. With property prices remaining stubbornly high despite economic headwinds, this move to increase borrowing limits will be a lifeline for many aspiring homeowners. This decision further underscores the commitment of lenders to address the affordability crisis head-on. With mortgage providers vying for market share in this ever-evolving landscape, other high-street lenders are likely to take note. So, as competition intensifies, we may see more lenders following suit, potentially transforming the mortgage market landscape. The tide may finally be turning for younger borrowers, who have long struggled with the dual challenges of high property prices and stringent lending criteria. For many, the dream of homeownership may finally transform from a distant mirage to a tangible reality.
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Iain Swatton
Director at Exemplar Financial Services
Nationwide’s rate reductions and changes to income multiples are a huge win for buyers, especially with the move to 6 times income on Helping Hand products. The increased LTIs on 5+ year fixed rates are well-suited for today’s market, where house prices are high and affordability is tough. With features like ERC-free moving and no overpayment limits, these flexible, future-proof products could appeal to borrowers looking for stability while getting on the property ladder. As long as the rates stay competitive, without penalising those opting for longer terms, this could be the way forward—but pricing will be key for its success.