UK lender offers long-term mortgages that cut rates over time

A new lender is offering Dutch-style longer-term fixed mortgages where the interest rate comes down as the home loan is paid off.

April Mortgages is currently only open to people who are remortgaging but plans to offer loans for house purchases by early April.

The firm is authorised and regulated by the UK’s Financial Conduct Authority and is part of a Dutch company called DMFCO, which has made more than 100,000 loans in the Netherlands via its mortgage brand, Munt.

Its first fixed-rate deals in the UK last for five, seven, 10, 12 and 15 years, at rates starting at 4.99%.

While fixed-rate mortgages lasting more than five years have had a lukewarm response from UK homebuyers, in other countries longer-term deals are commonplace.

The most eye-catching feature of the loans is that the firm will lower the rate on the mortgage as the borrower pays it off and reduces their loan-to-value (LTV).

“Over time you will reduce the size of your loan, and this means our risk reduces,” the firm says. “So we think it’s only fair that we automatically reduce your interest rate as you pay off your mortgage and the value of your loan drops in comparison to the value of your property at the time you bought it.”

For example, if someone buys a property for £200,000 and borrows £150,000, their LTV is 75%. If they reduce their mortgage debt to £140,000, their new LTV would be 70%. Assuming that at that point April Mortgages has a cheaper rate available at 70% LTV than at 75% LTV, it will automatically switch them on to the lower rate – they do not have to do anything.

“It’s a fixed rate where the rate actually falls,” says the firm, which believes it is the only lender in the UK offering this feature.

Another notable feature of its deals is that the company does not impose early repayment charges if borrowers sell their home during the product term or make overpayments using their own money.

The mortgages are only available through brokers.

The launch comes months after a new UK mortgage lender called Perenna announced home loans that allow people to fix their monthly payments for up to 40 years, and potentially borrow up to six times their income.

Nicholas Mendes​, a mortgage technical manager at the broker John Charcol, said: “Both lenders offer long-term fixed rates which will allow prospective buyers and mortgage holders peace of mind but also higher income multiples. Not only are the rates competitive, they also don’t have early repayment charges.”


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