Private Label has launched a 40-year discount mortgage in the light of the success of Standard Life’s 25-year capped product.
Funded by Verso, Discount 40 guarantees that the mortgage rate will be 1% below the lender’s SVR for the life of the mortgage, making the current payable rate 6.78%. As a result if borrowers keep the mortgage for the maximum term of 40 years they will have received a 40% discount. The mortgage also allows a penalty free exit at any time and free MIG on loans up to 90% LTV.
Tony Fisher, director of marketing at Private Label, said: “We have already had good feedback on the product and I expect that more and more lenders will now look at the possibility of long-term products.”
Long-term mortgages are the standard product in the United States. However, Standard Life was the first UK lender to enter the long-term market with a 25-year capped mortgage, Futureperfect, earlier this year. The product proved so popular that it sold out in the fortnight following its launch.
John Gill, finance director at Standard Life, said: “To fund our 25-year cap we had to use the all-round strength of the group, especially from our annuity and mortgage markets. But in general, putting together effectively an insurance company and a bank, is not a good source of long-term funding.”
Nevertheless, the certainty over long-term outgoings appears to be attractive to a lot of borrowers. The second tranche of Futureperfect was issued on 11 August capped at 6.49%, and it is expected that funds will be exhausted within a month.