Outlining her plan at the weekend, shadow chancellor Rachel Reeves said longer fixed-rate deals would enable people to buy houses with smaller deposits and with lower monthly repayments.

Longer mortgages are common in countries like the US, Canada and Japan, but unlike in some of those, Labour is not proposing they be underwritten by the taxpayer.

Ms Reeves has asked those involved in carrying out a Labour review of financial services to work with the mortgage industry to find ways to remove regulatory barriers and help trigger a broader cultural shift.

Sky News’ Money team asked three industry experts whether they could take off.

Richard Donnell, head of insight at Zoopla, tells Sky News it is a “good idea”, but the challenge will be ensuring rates are as competitive as shorter-term deals, otherwise people won’t be willing to take them out.

The main advantage, he says, would be for first-time buyers.

The risk of high mortgage repayments means purchasers – especially first-time buyers – are finding it harder to get on the ladder. As they struggle to get a mortgage, rents have also been rising, leaving people with less in savings. Combined with historically high house prices, first-time buyers are finding it had to put aside the bigger deposits.

“The advantage of long-term fixes is it means you probably avoid the need to stress-test affordability,” Mr Donnell says.

“I believe the government needs to look at how it can support the market for longer-term rates to develop at rates that will support demand for this type of product, as it’s a big mindset change.”

Would Britons really want to lock in?

Kevin Roberts, managing director at Legal & General Mortgage Services, isn’t convinced as things stand.

“It is worth noting that 25-year fixes are already available in the UK, but receive relatively little interest. Typically, people tend to choose the product that offers the lowest rate at that time, and that’s usually a shorter-term product, such as a two or five-year fix,” he said.

David Hollingworth, a director at L&C, agrees.

“There’s potential to grow this sector but until pricing and tie-ins are addressed they may continue to be a useful niche option rather than a market wide choice,” he said.

Two other major drawbacks

Mr Hollingworth highlights another issue.

“Longer-term fixed deals will often tie the borrower in with an early repayment charge throughout the fixed-rate period,” he said.

So if a mortgage needs to be reviewed at some point, perhaps because someone wants to move house, options become more limited.

“Even though deals can be taken to a new property there is no guarantee that the borrower will still meet the lender criteria at that time, or whether the lender will have competitive rates for any additional borrowing.”

Perhaps more obviously, there is also the concern that rates may fall significantly, as happened after the 2008 financial crisis.

“There may be some concern that they will be left high and dry if rates were to subsequently fall,” says Mr Hollingworth.

What’s already on the market?

The most common longer fix is 10 years. First Direct currently offers a fixed rate of 3.99% over 10 years for a 60% loan-to-value mortgage.

Perenna is a new lender targeting the long-term market, offering rates that are fixed for as long as 40 years but that only tie the borrower in for the first five. They currently offer a 25-year mortgage at 5.75%.

Perhaps recognising the early repayment charge (ERC) issue highlighted above, Kensington Mortgages offers fixed rates for the life of a mortgage and although there are ERCs, they are waived in certain situations – like a house move or sale/repayment.

Who could they benefit?

As discussed, first-time buyers struggling to get on the ladder – but also people who want long-term certainty and perhaps have no intention of moving.

“For example, if they are saving for a wedding in X years’ time, it could be handy to know how much they’ll be able to put away each month if what’s likely to be their biggest expense, their mortgage repayments, stay the same,” says Kevin Roberts, from L&G.

Source: News Sky

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The big rise in mortgage rates during the past year has throttled the housing market, with sales of existing homes falling for 11 straight months to the lowest level in more than a decade.

The average rate on a 30-year fixed mortgage rose to 6.12% on Thursday from 6.09% last week, according to mortgage buyer Freddie Mac. A year ago, the average rate was 3.69%.

The 15-year fixed-rate mortgage averaged 5.25%, up from last week when it averaged 5.14%. A year ago at this time, the 15-year FRM averaged 2.93%.

Mortgage buyer Freddie Mac reported Thursday that the average on the benchmark 30-year rate inched up to 6.12% this week from 6.09% last week. The average rate a year ago was 3.69%.

The average long-term rate reached a two-decade high of 7.08% in the fall as the Federal Reserve continued to raise its key lending rate in a bid to cool the economy and bring down stubborn, four-decade-high inflation.

“Following an interest rate hike from the Federal Reserve and a surprisingly strong jobs report, mortgage rates increased slightly this week,” said Sam Khater, Freddie Mac’s chief economist.

“The 30-year fixed-rate continues to hover close to six percent, and interested homebuyers are easing their way back to the market just in time for the spring homebuying season.”

The big rise in mortgage rates during the past year has devastated the housing market, with sales of existing homes falling for 11 straight months to the lowest level in more than a decade. Higher rates can add hundreds of dollars a month in costs for homebuyers, on top of already high home prices.

The National Association of Realtors reported earlier this month that existing U.S. home sales totaled 5.03 million last year, a 17.8% decline from 2021. That is the weakest year for home sales since 2014 and the biggest annual decline since 2008, during the housing crisis of the late 2000s.

source: foxbusiness

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Banks in Wuxi, Jiangsu province have cut the mortgage rate for first-time home buyers to below 4 percent, financial news provider CLS reported on Wednesday.

CLS said some banks in Wuxi have lowered the mortgage rates for first-time buyers from 4.1 percent to 3.8 percent, and they can apply for home mortgages at the lowered interest rate from Wednesday.

The mortgage rates for second-home buyers remains unchanged at 4.9 percent, according to CLS.

The reduction in mortgage rates came as China announced in January the establishment of a mechanism that allows local governments to adjust the regulatory floor of mortgage rates upon changes in local home prices, as part of its stepped-up efforts to promote steady and healthy development of the property market.

Under the mechanism, cities where new home prices fall for three months in a row on both a monthly and yearly basis are allowed to temporarily maintain, lower or cancel the local lower limit of mortgage rates for first-time buyers, the People’s Bank of China and the China Banking and Insurance Regulatory Commission said in a joint statement in January.

Source: china daily

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Q I have had my offer of £200,000 accepted on a property. I have also just sold my apartment for £135,000 (minus fees), and the transaction has completed. I’m temporarily living with family so have savings of £75,000, plus the sale proceeds (a total of about £205,000) to spend on my next home.

I’ve always been good at saving but never been very knowledgable on the best ways to manage my finances for the future. The sensible side of me thinks that I should buy the property outright with no mortgage. But I’m wondering if it would be a better idea to take on a mortgage and invest some of the money. I’m also wondering, if I did take out a mortgage what size of deposit I should put down?
MH

A The interest rates you can earn on savings – with the exception of regular savings accounts, those for children and some fixed-rate products – are pretty much always lower than mortgage rates, putting all your savings into property would seem to be a no-brainer. However, doing that would leave you without a savings cushion to rely on in times of financial crisis. So before you go ahead and sink all your savings into a new home, you may want to do a few sums to work out the minimum you would need to live on if you lost your job (or other regular income stream) and how much you would need to set aside to tide you over for six months – or a year or more if you are pessimistic about future job prospects. There’s less need to worry about having a financial cushion if your regular income is from a pension or pensions as this kind of income carries on being paid whatever your employment situation.

As to the size of deposit you should put down, the answer is the bigger the better. However putting down a deposit of no more than 60% of a lender’s valuation of a property (not necessarily the same as the purchase price) will get you the best mortgage interest rate in all the different types of mortgages available.

source: theguardian

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Prices began falling last June, but are still higher than they were a year ago. Now, as demand appears to be coming back into the market, due to a slight drop in mortgage rates, prices are pushing back.

In December, the latest read, U.S. home prices were 6.9% higher year over year, according to CoreLogic. That was the lowest annual appreciation rate since the late summer of 2020. Last April, annual price appreciation hit a high of 20%.

Falling home prices were reflecting weaker housing demand, as inflation, job cuts and uncertainty in the economy piled onto the barrier put up by higher mortgage rates. But mortgage rates began to fall in December, and prices reacted immediately. The cooling continued, but not as much as in the months before.

“While prices continued to fall from November, the rate of decline was lower than that seen in the summer and still adds up to only a 3% cumulative drop in prices since last spring’s peak,” said Selma Hepp, chief economist at CoreLogic.

Early spring market surge?

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