There’s been widespread speculation that the UK is just weeks away from seeing the launch of a Dutch mortgage product with interest rates that fall as the loan to value ratio improves.
The lender – April – says the interest rate will drop as the borrowers pays down a mortgage, thereby improving the LTVB ratio
The Times and other newspapers publishing leaks about the new product suggest it will be aimed at buyers with 15 per cent deposits or more, although April wants the concept to rapidly be extended to buyers with just a five per cent deposit.
The mortgages have fixed terms from five to 15 years, with new rates kicking in as the loan is repaid without the borrower having to remortgage. The product also encourages the borrower to request a property valuation during the mortgage term which – if the property has appreciated in value – should reduce interest rates on the outstanding amount by even more.
Forty year mortgages are common in the Netherlands and April says it may offer these if there is clear interest in the UK.
April’s mortgages start with an interest rate of 4.99 per cent with application and completion fees but no early repayment charges.
According to the lender, a borrower could save over £5,000 in interest if their loan-to-value ratio falls from 85 to 60 per cent over a 15-year term.
The company depends on Dutch pension fund backing for its UK mortgages, but The Times says it is actively seeking to build relationships with UK pension funds.
This move follows discussions within the UK government about adopting Dutch-style, long-term fixed mortgages to aid first-time buyers. In the Netherlands,
April is incentivizing brokers to recommend its products by offering an annual service fee from the fifth year of a mortgage term.
