From 15 March, first-time buyers, homemovers and remortgagors in England and Wales will have access to mortgage products with terms up to 40 years with Habito.
Martin Stewart, director of The Money Group, said: “It is an interesting move by Habito and while there is a need for innovation within the industry to address changing demographics, I will need a bit of convincing to say this product is it.”
Stewart went on to outline that Gordon Brown tried to change the culture of shorter term fixed rates and that failed to gain traction.
He said: “I personally have arranged only one 10-year fixed rate in the past five years, so where the demand is coming from for this type of product is not immediately clear to me.”
“If I was a consumer looking at mortgage rates that are at a 300 year low, I would be questioning whether we are likely to see a consecutive run of 22 base rate increases of 0.25% which would have to happen to make my 5% long term fixed rate value for money.”
Stewart believes that there will be inflationary pressures arriving soon due to sheer volume of government stimulus.
He added: “Managing that with an arguably over leveraged economy that will not be able to support higher interest rates is going to be a difficult job.
“I continue to maintain the same position I have since 2008, we are Japan, but with inferior sushi.”
Mike Brown, director of Crystal Clear Financial Services similarly believes the launch of 40-year term mortgage is interesting, however, he does not think the rates are compelling enough for consumers to want to lock down for this period of time.
He added: “The rates also seems less attractive than some lenders current variable rates, let alone 10-year fixed rates.
“Although the products don’t appear to have early repayment charges, I am equally perplexed as to who their target market are at these rates.”
Brown went on to say that he can see Habito are trying to disrupt the shorter-term fixed and remortgage market, but he believes it appears to be a launch without audience.
Nick Morrey, product technical manager at John Charcol also looks to early repayment charges and said: “The barrier to any success/take up for long term fixed rates has often been the ERCs.
“In fact I have told several lenders over the years that if they want to release a 10-year fixed rate they have to drop/reduce the ERCs.
“So this is one of the few missing pieces to what lenders offer the public and some will undoubtably take it up.
However, Morrey explained that there a significant difference between a 5-year fixed rate, and therefore he believes that the cost is likely to be too high for most.