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Revolutionising the UK Mortgage Market: April Mortgages Introduces Dutch-Style Decreasing Rate Loans:


In an innovative move within the UK mortgage market, April Mortgages is introducing a lending model inspired by Dutch practices. It focuses on long-term fixed mortgages that promise lower interest rates as borrowers decrease their loan balance. This approach, while a norm in several countries, marks a novel offering in the UK, particularly appealing to those looking to remortgage their properties. With an eye on expanding its services to include house purchases by early April, April Mortgages is charting a new course in the housing finance sector.


April Mortgages, a branch of the Dutch company DMFCO known for its extensive lending through the mortgage brand Munt in the Netherlands, is stepping into the UK market regulated by the Financial Conduct Authority. The firm's entry comes with an assortment of fixed-rate deals spanning five to fifteen years, starting at a rate of 4.99%. This model is distinct in the UK, where long-term fixed-rate mortgages typically see a tepid reception compared to the warmer embrace they receive abroad.


The standout feature of April Mortgages' offering is the automatic reduction of interest rates as borrowers chip away at their mortgage, lowering their loan-to-value (LTV) ratio. The company's rationale is straightforward: as borrowers reduce their loan amount, the associated risk for the lender diminishes, warranting a fair reduction in the interest rate. This automatic rate adjustment mechanism ensures that borrowers benefit from potentially lower rates without needing to take any action, a unique feature that April Mortgages believes sets it apart in the UK market.


For instance, a borrower who initially takes out a loan with a 75% LTV and manages to lower their LTV to 70% through repayments would automatically qualify for a lower interest rate if one is available for the new LTV bracket. This process eliminates the need for borrowers to refinance to benefit from reduced rates.


Another consumer-friendly aspect of April Mortgages' products is the absence of early repayment charges for borrowers who sell their property or make overpayments with their funds during their mortgage, offering flexibility and savings opportunities. Currently, these innovative mortgage options are accessible exclusively through brokers, emphasising the personalised advice and guidance that can be crucial in navigating these new offerings.


The introduction of April Mortgages' long-term, flexible-rate products follows the launch of another lender, Perenna, which also broke ground with up to 40-year fixed-rate home loans, offering the possibility to borrow up to six times one's income. According to Nicholas Mendes, a mortgage technical manager at John Charcol, both lenders are not only providing competitive rates and higher income multiples but also delivering peace of mind to buyers and existing mortgage holders through the absence of early repayment charges.


As the UK mortgage landscape evolves with these new entrants, prospective buyers and those looking to remortgage have more options than ever, promising greater stability and financial predictability in an often turbulent housing market.


Written by Veera Josey, 9th February 2024

Sources: The Guardian, The Times

 
 
 

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