Long-Term Fixed Rate Mortgages in the UK

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With inflation soaring and interest rates rising, households with floating rate mortgages will be looking to lock in a longer-term deal in order to prevent their payments being dependent on such an uncertain economic environment and possible future interest rate hikes. There are currently a number of lenders offering long term fixed rate mortgages that many households might find attractive. Short term fixed rate mortgages are fixed for a period of 1 to 5 years, while long term fixed mortgages last from 5 to 50 years. These types of mortgages protect borrowers against rising instalments in a rising interest rates environment hence being an attractive option for risk averse borrowers.

  • As of February 2023, lowest mortgage rates were six times the record lows of 0.84% seen in October 2021.
  • The lenders in the UK’s long term fixed rate mortgages market include Habito, Lendinvest, Kensington Mortgages and Virgin Money. In addition, these lenders are being joined by new lenders coming into the market, such as Perenna. We spoke with Perenna’s founder and CEO, Arjan Verbeek, to learn more about the market and we are incorporating his expert opinion in this research piece.
  • As of August 2022, the UK government granted licenses to lenders that offer mortgages with fixed rates for periods as long as 50 years.
  • Indicative rates for long term fixed rate mortgages offered for 30 to 50-year deals might range from 4% to 7% as of August 2022. Average rate for 30-year fixed rate mortgages was 6.23% in January 2023. In January 2022, the average rate for 30-year fixed rate deals was 3.64%.
  • Market players such as Perenna issue covered bonds which are bought by the likes of pension funds and insurers for long term financing. Other lenders such as Kensington Mortgages use pension annuities in collaboration with Rothesay Life, who have over GBP 60bn in assets matching them with long-term liabilities by providing financing to market participants.
  • By issuing regulated covered bonds on a matched basis all market and prepayment risk is passed on to the investors. Covered bonds are highly rated, liquid, tradable instruments which benefit from preferential regulatory treatment. They are ideal assets for pension funds and insurance companies to back their long-dated liabilities. They are also highly demanded by banks for liquidity portfolios.
  • As of August, 2022 the longest fixed offer is a 40-year mortgage, offered by Kensington Mortgages and Habito.
  • LTV rates offered by the lenders can be as high as 95%.


Long-Term Fixed Rate Mortgages in the UK

21 Feb 2023



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