Looking for a non-bank lender for your mortgage? Good news, Pepper Money (formerly Pepper Homeloans) has just launched a new range of fixed rate mortgages.
Pepper Money this week launched a number of new 3 and 5 year fixed rate mortgages. The non-bank lender entered the mortgage market back in 2016 and until now has only offered variable rates - and not the most competitive ones at that…
However, according to The Times, the new move to introduce fixed rate options is part of a push to grow lending by at least 30% this year, interestingly concentrated on segments of the market typically overlooked by mainstream lenders, such as landlords, the self-employed and those with a blemished credit history.
Here’s a summary of Pepper Money’s best new fixed rates:
|
Loan to value ratio (LTV) |
Fixed Term |
Rate |
|
<=80% |
3 years |
3.20% |
|
<=90% |
3 years |
3.35% |
|
<=60% |
5 years |
3.45% |
|
<=90% |
5 years |
3.55% |
Fixed rate mortgages are increasing in popularity
The net value of fixed rate mortgage drawdowns has been steadily increasing since the beginning of 2015 and it looks as if this trend is only going to continue.
According to Barry Delaney, Head of Sales and Marketing at Pepper Money “Across the market, close to 60% of new borrowers are choosing to fix, and some brokers report that the proportion is closer to 70%. Fixing is a no-brainer, especially when there’s an expectation that wholesale interest rates will tick upwards in 2019.”
What are the advantages of a fixed rate mortgage?
So fixed rate mortgages are increasing, but what’s the big draw? Well, it’s simple really, in an uncertain property market, the certainty that comes with fixed rates can be worth a lot to many house-hunters.
Mortgage repayments tend to be the biggest monthly outgoing for most households and knowing exactly what you’re going to be paying every month can bring peace of mind and really help with budgeting.
What are the downsides of a fixed rate mortgage?
The first and most obvious downside associated with a fixed rate mortgage is the time commitment. Let’s say for example you’ve locked yourself into a 5 year fixed rate. There is a chance that corresponding variable rates will fall lower than your fixed rate during that time, meaning that you’ll ultimately end up having to pay more than you need for the remainder of your fixed term.
Another disadvantage of fixed rate mortgages is the fact that you might have to pay penalty fees if you want to increase your monthly repayments at any stage. So, if you want to pay off a chunk of your mortgage in one go with a big lump sum, you’ll likely be charged an “additional funding fee” for doing so. This is not the case for variable rate customers.
Finally, if you decide to switch rates or banks before the end of your fixed term, you’ll be hit with a breakage fee which could be quite costly.
Thinking of switching?
Before you rush off to switch your mortgage over to a fixed rate, make sure to compare all rate types on the market and always consider the lifetime value of your loan when considering any enticing incentives.
It’s also worth noting that The Central Bank announced some new changes earlier this week that will make spotting when you should switch mortgage lenders to save money a lot easier and more transparent. The new requirements will come into effect from the 1st of January 2019.
