Minimum income for the product is £30,000 or £40,000 joint and the higher income-multiple 25-year mortgage offers a 5.95 per cent pay rate to consumers if they choose to take the pure fixed rate option. The product is available at 90 per cent LTV, with the loan subject to a seven-year sliding scale redemption penalty, but also offering a 5 times income multiple.
However, consumers with a higher risk appetite can also customise the loan with a variable rate tracker. The amount allocated to the variable rate will react to rate changes plus 0.75 above base rate and can be repaid penalty free.
Jeff Knight, head of marketing at GMAC-RFC, said: “The problem with these products in the past has been the redemption penalties, combined with concern about losing out to short-term rate reductions.”
Knight added: “The interim report by Professor Miles looking into long-term fixed rates on behalf of the government highlights the fact that borrowers have a poor understanding of risk and therefore do not always appreciate the security that a long-term fixed rate offers. The 25-year customised mortgage requires borrowers to describe their risk appetite by choosing between the fixed and variable rate elements.”
Tony Burdin, head of marketing and PR at Leeds & Holbeck Building Society, which launched the first 25-year fixed in May after the Chancellor’s budget speech last year, said take up of the product still ‘ticks along.’
“Customer take-up is modest and even with GMAC there are still only three 25-year fixed rate suppliers in the market,” he said. “But it’s quite encouraging that GMAC have launched, because the more suppliers there are, the more awareness this will create in the market.”
