At the time of writing, the Habito One rates without early repayment charges start at 2.99% (for a 15-year term where someone is borrowing 60% of the property’s value), rising to 5.6% (for a 40-year term where the applicant is borrowing 90%). The rates with early repayment charges – the tie-in period is 10 years – are slightly lower: from 2.79% to 5.4%.
Perenna, meanwhile, plans to launch its fixed-for-life mortgages in the second half of this year, and says payday loans in Sharon it will be letting homebuyers borrow up to six times their income. It intends to start with a 30-year fixed-rate, then launch 40- and 50-year fixes later.
One of the big downsides of this new breed of mortgage offering fixed monthly payments for decades is that most people will be able to get a much lower interest rate if they go for a standard shorter-term deal such as a two- or five-year fix. With these, when the offer period ends, you simply move to another competitive deal.
But the lenders behind these fixed-for-life deals say that as your interest rate is guaranteed for the lifetime of your loan you are protected against any threat of fluctuating interest rates, and you won’t have to keep paying expensive product fees, perhaps every two or three years.
Take a couple where both earn ?25,000: if they went for a deal where borrowing was capped at 4.5 times their combined salary, they might be able to buy a home worth ?250,000. If they went with, and qualified for, the Habito One deal, they could borrow seven times one salary and five times the other – allowing them to buy a home costing ?333,000.
For a solo applicant earning ?75,000 whose borrowing was capped at 4.5 times income, they might be able to buy a home for ?375,000. With this new deal, they could potentially purchase a property worth ?560,000 (in this last example, it’s not quite the full seven times salary because of Habito’s rule that customers must have a minimum 10% cash left over in their accounts after all expenditure). (All of the examples assume a 10% deposit).
Barclays and HSBC are among the big names that will go up to 5.5 times income for high-earning borrowers wanting a mortgage. Photograph: Chris Ratcliffe/Rex Shutterstock
What about other lenders?
Several big names – including Halifax, HSBC, Santander and Barclays – will now go up to 5.5 times income for high-earning borrowers, and will typically let those who are accepted access their entire range of standard mortgage deals.
At Halifax, a maximum of 5.5 times salary will apply to those earning more than ?75,000 who are borrowing up to ?1m at less than 75% LTV.
At Santander, it is a combined income for all applicants of ?100,000 or more, with a maximum loan of 75%.
With Barclays, at least one borrower must be on ?75,000-plus, or the two highest-earning applicants must have a combined income of ?100,000 or more, and the maximum loan is 85%.
The return of big loans
After the 2007-08 financial crisis, mortgages to first-time buyers in particular were immediately slashed but in recent years many lenders have eased lending restrictions.
A further relaxation is on the cards: the Bank of England has announced it will consult on scrapping a rule that forces many borrowers to prove they could afford a big rise in interest rates before they can be approved for a mortgage. At the moment, with a typical two- or five-year deal, lenders must stress-test an applicant’s ability to repay their home loan at 3% above the standard variable rate that the borrower might go on to at the end of the initial period. This limits the amounts many people are able to borrow.