Lenders need to adopt a more pragmatic long-term view to lending to overcome uncertainty in the market, according to Kevin Bailey, managing director at Wessex Investment Management.
Bailey's comments come after brokers were asked whether it was time lenders looked into the past and developed new versions of products that “many have only read about in the CeMAP revision but never experienced”.
A few examples of these products include capped rates, ‘guaranteed’ fixed rates, cashback mortgages, and all-in-one mortgages.
One product Bailey identified as being possibly beneficial was longer-term mortgages, saying: “I am sure the average time people have a mortgage is now well beyond the average 32 years it once was.
“Lenders should offer long-term fixed rates, such as 30-years plus, and make them extremely portable and adaptable - for example in the event of divorce,” he explained.
He added that it “shouldn’t be too difficult to arrange” a 30-year term at around 4.75 per cent given current gilt yields and Bank of England interest rate expectations.
“If I’d had that option when I first borrowed over 40 years ago, I would not have hesitated,” Bailey added.
Release Freedom broker and director, Simon Bridgland, argued that Capped and Collared mortgages would be a “dapper fit right now”, as they give borrowers the “best of both worlds”.
“They offer upside protection if rate rises with the added advantage of drops in rate if the variable rate goes south,” he explained.
However, he cautioned that lenders would need to “price the drop carefully” as consumers are “savvy” when it comes to spotting something which won’t drop.
Additionally, Lawson Financial director, Michelle Lawson, said: “Mortgages these days are a two-horse race between a tracker and fixed rate.
“All products have their place, though, and one of the bug voids to be filled is offset. Some lenders offer these but they are merely dabbling.
“We need some great product innovation and capped rates are great as it gives an element of certainty to both parties.
“Some new-to-industry brokers will have no experience of some of the products that they have studied for as they haven’t been offered by lenders for years.”
Meanwhile, EHF Mortgages managing director, Justin Moy, pointed out that some of the old-style products may be harder to price in today’s market.
However, he added that many “provide sensible answers” to the choices that borrowers need to make in 2024, and may “relieve the burden” of excess processing on lenders and brokers.
“Borrowers could once choose a Capped and Collared mortgage deal, now they are straightjacketed to a plain vanilla tracker or fixed deal,” he added.
Thanks to the Newspage community for sharing their thoughts with FTAdviser.
tom.dunstan@ft.com
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