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Is April Mortgages Set to Change the Game? How Will Long-Term Fixed Rates Reshape the UK's Mortgage Landscape?

Journalist: Rohit (News Alerts)

ended 09. February 2024

In an intriguing twist to the UK's mortgage sector, April Mortgages, a new Dutch-style mortgage lender is stepping onto the scene, offering fixed-rate mortgages where the rates will automatically reduce as borrowers repay them.

This move comes hot on the heels of Perenna, another lender that launched in January 2024, both aiming to carve out a niche in a market traditionally dominated by shorter-term offerings. 

Historically, the British homeowners have been hesitant to lock in for the long haul, preferring the flexibility and often lower rates of shorter-term mortgages. However, the economic turbulence and interest rate fluctuations of the past two years might have stirred a shift in consumer sentiment. 

April Mortgages' entry into the market tests the waters once again for the appetite for such products, potentially heralding a significant change in how Britons approach their mortgage planning.

Questions:

  1. Market Appetite: With April Mortgages stepping into the arena, what's your take on the demand among UK clients for long-term fixed-rate products? Do you perceive a growing interest or skepticism towards these offerings?
  2. Historical Context: It's no secret that similar mortgage products have made appearances in the past without gaining substantial popularity. In your view, have the recent economic shifts and uncertainties of the last two years altered the UK homeowner's perspective? Are we more open to embracing these longer-term solutions now?
  3. Future Outlook: As we witness these developments, how do you foresee the impact on the UK mortgage landscape? Could this signal a broader shift in homeowner preferences and financial planning strategies?

11 responses from the Newspage community

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Rohit Kohli
Director at The Mortgage Stop
Its always good to see new lenders and new products coming to the market, it increases choice and should help drive further innovation. The events of the last couple of years have been front and centre of many peoples minds and we have had conversations with potential borrowers about long term fixed where we have felt their circumstances would suit. If April Mortgages do launch these products with reasonable ERC terms then they could offer further choice to borrowers which is very much needed ijn a market filled with 2 year and 5 year options from the mainstream lenders. For a few clients they idea of knowing your monthly payments for the long term is appealing, paricularly where they have seen friends and family struggle recently. However most people are still set on shorter term mortgages and I think whilst these long term mortgages are a positive step it will take years before they become a standrad option.
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Ben Perks
Managing Director at Orchard Financial Advisers
As Brokers what we strive for is variety for our clients. A suite of products for us to discuss with borrowers, so we have an appropriate option for each individuals circumstances.

The longer term fixes may not be everyones cup of tea, but for those that it suits it is great to see a bit more competition in the space. Competition drives better products and rates, so the more Lenders the better. With the volatility of interest rates in recent years, i think the interest in these products is growing.

The key thing with these products is the 'lock in'. Whilst clients love certainty they also want the ability to reassess options in the short to medium term. So whilst interest in the products will grow, and for some people they will tick a box. I think the vast majority of borrowers will be reluctant to take decade long fixes, unless they are shockingly cheap.

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Bob Singh
Founder at Chess Mortgages
The recommendations of the Miles Report are finally being implemented albeit by non-traditional lenders.

I believe if the price is pitched correctly and having the right flexibility to switch to lower rates ( should rates fall further ) this could be a winner. That is until the UK based lenders fight back with equal or better products.

This will sound the death knell for broker who rely on 2 years deals to churn clients. Any proposition therefore needs to address the broker’s remuneration over the term.

The change in mindset may take some time but the system works well in the US and offers homeowners protection against times of rising rates



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Aaron Strutt
Product and Communications Director at Trinity Financial
We have seen a few of these lenders offering longer-term fixes over the years and they probably should be more popular, although the overwhelming number of borrowers simply stick with two or five-year fixes.
Many brokers in the mortgage industry remain sceptical about these long-term products. They need to be cheaper, more flexible and offer something unique to entice more borrowers.
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Michelle Lawson
Director at Lawson Financial
Long term fixed rates aren't popular in the UK market for most due to their restrictiveness although April's offering looks interesting as it negates the issues that most people can't foresee. By not charging penalties on overpayments, full redemption from own funds or on moving house, this is a step in the right direction for product innovation. We need some new ideas and new blood so it will be interesting to see how this transpires hopefully in a fully accessible market rather than a restricted chosen few.
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Chris Schutrups
Founder at The Mortgage Hut / William James Wealth Management
As brokers we aways welcome new lenders to the market to help us support and help more customers. There are lots of positives when it comes to longer term fixed-rates and ultimately pricing is something we strive in the UK market as it stands right now.

Longer term fixed-rates have to be structured in such a way so that consumers have confidence to buy our price, which they think is good value for money.

An example is Parenna. Their lifetime product is something that consumers wouldn't go to because they're worried about changes in circumstances and large exit penalties. They have been clever in how they structure and in doing so with a 5-year tie. It's a 5-year fixed rate which will then continue on, so from a customers point of view, if rates decrease, they can move away after 5 years.
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Elliott Culley
Director at Switch Mortgage Finance
Long term fixed lenders have a great opportunity to kickstart their campaigns for long term fixed rates due to the recent economic turmoil. Lots of borrowers were kicking themselves that they didn't tie in fixed rates for longer. Education on these type of mortgage will be key as borrowers will assume they will work in the same way to a traditional mortgage. The two offerings from Perenna and April do offer tie in periods, but have flexibilty so you may not need to pay any early repayment charges or fees to come out of the deals if you want to move house. There will be a market for this type of product, but there will need to be a change in public opinion and attitude and this will be the biggest hurdle these lenders will need to overcome.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
UK borrowers have never really bought into the long-term fixed rate mortgage idea, much to the frustration of many in the government who keep pushing for this type of mortgage to be more widely adopted. Like many other long-term fixed rates deals the issue with this new offering from April is one of flexibility and risk; do you feel happy locking into a 7-, 10- or 15-year fixed rate deal at over 5% now? People don't want to be tied into a 10-year fixed rate at 5%+ if rates are available at 3% or 4% at some point in the future. Some of the new crop of long-term fixed rate mortgages have no form of tie-in to the lender, which does massively help their appeal. April has a "half-way house" type approach; you are free to pay the mortgage off from your own resources without charge (so a house sale, or inheritance for example), but they will hit you with a penalty charge if you switch lenders to get a better rate.
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Graham Cox
Director at Bridging Hub
Long-term fixed rate mortgages are to be welcomed. They won't be for everyone, particularly if the early repayment charges are punitive, but it's great that the option is available. The biggest challenges lenders like April face is making consumers aware these products exist, and gaining wide enough distribution with brokers.
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Akhil Mair
Director at Our Mortgage Broker
BOOOM ! The emergence of April Mortgages, signals a significant shift in the UK mortgage landscape. The recent economic turbulence and interest rate fluctuations may have prompted a reevaluation of long-term fixed-rate products. There seems to be a growing interest among UK clients for these offerings, driven by a desire for stability amidst uncertainty.

The future outlook and the increasing interest in long-term fixed-rate products could herald a transformative period for the UK mortgage landscape. Beyond offering stability to individual homeowners, this trend may catalyze broader changes in financial planning strategies. As more individuals opt for long-term certainty, we could see a shift in the mortgage market towards greater emphasis on security and predictability. This could prompt other lenders to follow suit and introduce similar products, further diversifying the options available to consumers.
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Austyn Johnson
Founder at Mortgages For Actors
I actually love this idea. Being rewarded for loyalty is a huge change nowadays! Hopefully the lender can support it and it wont put them out of the game as soon as some instability hits the market. As long as they keep short term ERC's, this would be a game changer. I'm in.