Or at least change the tyres? Currently, mortgages in the UK all broadly work in the same format, whether you go for a fixed rate or a variable rate.
Your rate is agreed at the outset and follows the agreed terms for the next few years, only changing when you re-mortgage.
Going Dutch
However, a new type of product has just been launched: a Dutch-style mortgage. It is offered on fixed rates for 5-15 years. Over the years, as your debt decreases and you move down the loan to value thresholds, your interest rate decreases with accordingly. This effectively removes the need to remortgage, meaning you can fix your rate for a longer time period and potentially borrow more at the outset.
Interest Rate Reduction
Another good feature of this style of mortgage is you will automatically be switched to lower rates as soon as you are eligible without the need for you to do anything or call anyone.
On the other hand, this product will stop people from looking around the market for better deals when their rate is due for renewal. But with around 680,000 households currently thought to be on the Standard Variable Rate it could save the public hundreds of thousands of pounds.
Watch This Space
At the moment these mortgages are only offered by April Mortgages, a UK subsidiary of the Dutch asset manager DMFCO, which has been offering mortgages in the Netherlands since 2014.
At Calluna Financial, we think these mortgages are a welcome addition to the market and we will be able to assist customers who are interested in exploring this option.
