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Habito to launch 'lifetime' fixed-rate mortgage that lets you lock in for up to 40 years - here's how it stacks up

Habito to launch 'lifetime' fixed-rate mortgage that lets you lock in for up to 40 years - here's how it stacks up

Homebuyers and movers in England and Wales can fix their mortgage rate 'for life' later this month as Habito has revealed it will allow borrowers to lock in for up to 40 years with no early repayment charges. But while fixing gives you peace of mind over your repayments – you're taking a bet that you won't be able to save more in the long run by switching to cheaper rates in the meantime.

Online broker, lender and home-buying service Habito claims its new range includes the UK's 'longest ever' fixed deal, with fixes of between 10 and 40 years available at interest rates from 2.99% to 5.35%. One broker we spoke to doesn't recall ever seeing a fix as long as 40 years. You can currently fix elsewhere for two, five, 10 and 15 years at lower rates than Habito is offering.  

Don't think that long-term fixes are the only kind of mortgage out there though. Check out our Cheap Mortgage Finding guide for help on looking for the best deals or a mortgage broker, and use our Mortgage Best Buys tool to compare rates.

You can take Habito's new fixed-rate mortgages with you if you move or repay them early without incurring extra fees

In brief, here's how Habito's new range of mortgages – which launch on 15 March – will work:

  • The mortgages are available to home purchasers, home movers and remortgagers. The deals will be available from 60% loan-to-value (LTV) all the way up to 90% LTV, so those with between 10% and 40% equity in their homes or as a cash deposit will be able to access these mortgages. Habito adds that it plans to offer these mortgages to those with a 5% deposit or equity later this year.

  • You'll be able to fix for anywhere between 10 and 40 years. Once you've taken the mortgage out, the interest rate at that time will be fixed for the life of the mortgage.

  • The product fee, which you pay to take out the mortgage, is fixed at £1,995 at all LTV levels. You won't have to pay a product fee again unless you need to borrow more money in future. Mortgage product fees are typically around £1,000, so Habito's is on the high side.

  • There's no early repayment or exit fee. This is unusual for a mortgage, where you'd normally incur a fee for leaving a deal early or for repaying it early, which can run into the thousands. With one of these Habito mortgages, you won't be penalised if you decide to overpay your loan or move to a different lender.

  • You'll be able to 'port' the mortgage without facing an exit fee. Some lenders allow you to port your mortgage, meaning you can take your mortgage with you to a new property without paying an exit fee. All of Habito's mortgages in this range are portable. But bear in mind that if you need to increase your mortgage size when you move, you will need to pay a mortgage product fee again, and any additional borrowing will likely be at a different interest rate to the original mortgage portion. Porting can be more complicated than simply moving your mortgage. See more info in our Porting a mortgage guide.

  • The mortgages are available if you're buying in England or Wales only. Unfortunately, they're not initially available for those buying in Scotland or Northern Ireland, but Habito says it plans to expand into these countries eventually.

  • The mortgages are only available directly via Habito. Until now, Habito has largely operated as a free, online mortgage broker - this is its first foray into residential mortgage lending since it got its lending licence from the Financial Conduct Authority (FCA) in 2018 (it already offers buy-to-let mortgages). Habito's lending arm will stump up the cash for the mortgage loans.

    An independent broker can advise on whether this kind of mortgage is right for you. Even if you speak with a Habito mortgage advisor, they should remain impartial and only recommend this mortgage if it's right for you. Habito says its brokerage and lending arms are completely separate and both are regulated by the FCA.

You can get cheaper fixed-rate mortgages elsewhere

When it comes to fixed-rate mortgages, typically the longer you fix for the higher the rate you'll pay. Of course, it's not just rate you need to factor in - but also any product fees too. For simplicity though, here's an example of how Habito's lifetime mortgage interest rates compare to the wider market - in every scenario it can be beaten, although there are no comparable mortgages offering fixes above 15 years. 

How Habito compares at 60% LTV
  2yr fix 5yr fix 10yr fix 15yr fix 16yr-40yr fix
Habito rate

N/A

N/A

2.99%

2.99%

3.29%-4.2%

Lowest fixed rate on wider market

1.14%

1.24%

 

 

1.99%

2.55%

N/A

How Habito compares at 90% LTV
Habito

N/A

N/A

4.39%

4.39%

4.49%-5.35%

Lowest fixed rate on wider market

3.09%

3.24%

3.89%

N/A

N/A

(i) Comparison by rate only - table doesn't take into account product fees.

What are the pros and cons?

Getting the right mortgage deal for you can help you to save £1,000s, but getting the right mortgage doesn't necessarily mean fixing for the longest amount of time or even getting the lowest interest rate. If in doubt, speaking to a mortgage broker is often the best course of action. That said, there are some clear pros and cons of these Habito deals:

Pros:

  • You'll have peace of mind over what you'll pay on your mortgage for potentially up to 40 years. So if you're paying £500/mth in year one, you'll still be paying £500/mth in year 39, regardless of whether interest rates elsewhere have shot up. 

  • You can save £1,000s on mortgage fees. The mortgage arrangement fee on one of these deals is expensive at £1,995, but you'll only ever have to pay it once (unless you need to borrow more in future). In comparison, if you remortgaged five or 10 times over the course of paying off your mortgage to various two or five-year fixes, you might end up paying £10,000+ in product fees overall.

  • No early repayment fees. As mentioned earlier, these mortgages are interesting because you'll never have to pay an early repayment fee if you decide to remortgage elsewhere or overpay the mortgage (even in full) later down the line – giving you greater flexibility. 
Cons:
 
  • Habito's interest rates aren't the cheapest. We can only directly compare Habito's 10 and 15-year range - which can both be beaten by interest rate alone. Elsewhere, cheaper two-year and five-year fixes are also available, although here you're not strictly comparing on a like-for-like basis given the much shorter mortgage term.

  • You may potentially miss out on mortgage rates going down in future. There's no saying that interest rates won't go down even further in future - although they're currently at historic lows. As you'd be fixed in with one of these mortgages, you'd have to get out of it first, ie, remortgage, if you wanted to switch to a lower interest rate. Having said that, it is penalty free to leave one of these Habito mortgages early.

  • The product fee with Habito's lifetime mortgage range is high. At £1,995 it's around double the typical arrangement fee on other fixed-rate deals, though you might potentially only ever have to pay it once. Remortgaging normally comes with a fee of around £1,000 - which isn't based on the length of the fix - so remortgaging five times over the life of a standard mortgage would typically cost you £5,000+ in product fees overall.

You can use our free Mortgage Calculator to help you compare rates. You may also want to consider getting free advice from an independent, whole of market mortgage broker. See our Cheap Mortgages guide for help finding a broker. 

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