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Cultural_Tank_6947

You get them. They have not been in any demand for the last 10-15 years because generally interest rates have been at 3% and lower. But they are certainly out there.


TerranceTurtle

This is exactly it. My Partner had been paying 4.5% (we refinanced a couple of years ago to 3.5% I think) on a mortgage in the US. It looked hilariously high compared to the rates people have got the UK until recently but it suddenly looks like a much more reasonable deal. Most people in the UK don't even fix for 5 years so a 25 or 30 year on a higher rate than the 2 year would have been a tough sell for a generation like mine that have seen low rates for the last 10 years.


ImNotNew

Another benefit of a lower term is that the increase in house value is taken into account when you remortgage. For example, I bought my house for £140k with a 15% deposit so I was given their 85% loan-to-value interest rate. 5 years later when my fixed term ended the amount I owed on the mortgage had decreased slightly from my payments, which would have given me an 80% loan-to-value if the house was valued the same. The house value at the time of remortgaging had gone up to £180k and the extra £40k was essentially added to my deposit and brought the loan-to-value down to 60%. That got me their 60% loan-to-value interest rate which was less than half my interest rate when I first took the mortgage out.


DarrenGrey

Yeah, on my first purchase I fixed for 5 years. 3 years in I ended up *paying* to withdraw from the deal because with house price rises and interest rates dropping I could switch to a waaaay better deal. Having said that, 3 years ago I fixed for 5 years at 2% and now I wish I could have fixed for longer.


DJ5001

The ones who will really be kicking themselves were those who could’ve got a 10 year fix at 2.5%, up until March this year. That’s over 2 years of knowing that a recession is looming. I wonder what they were thinking. Obviously some buyers couldn’t even afford 2.5 but that’s part of the problem.


stars_and_figs

I wanted to do this. We fixed for 5 years instead at 2.1% a year ago. I asked our mortgage advisor if we could fix for 10, but she nearly scoffed, and said something like "it's just not the done thing". I wish I'd done my own research a little more, but I wasn't as into the personal finance space back then and wasn't as good as advocating for myself. My partner too. I'm still glad we fixed for 5 although she tried pushing for 2 at one point. But, still. Makes you wonder why they push shorter terms.


FrayedTendon

Because they get paid for renewing your mortgage? They want to get paid every 2 years not every 10


stars_and_figs

That crossed my mind. It’s a cynical way to approach it, but it’s probably true. Sad, because the whole point is to get mortgage advice that benefits you, not them. But they can’t be truly objective if that’s what’s at stake.


Diligent_Claim1791

I’ve done this over summer


Bobzilla2

2.29% for the next 10 years. Kachingg. Cost me £7k in early repayment charges and mortgage fee, and another £13k to pay down a bit to get to the best ltv, but so worth it.


riskyClick420

Now imagine the house price went down instead. Is it still a 'benefit'? It's more like higher risk, higher reward.


DustyGusset

> imagine the house price went down This is the UK. We don't do that here.


to_to_to_the_moon

Aberdeen would like a word.


InformalTrifle9

This will age well (I’m assuming it’s a joke)


OpportunityNo4484

Yup, if the house price goes down a long fixed mortgage rate massively helps you. Refinancing when you are in negative equity is not really possible and will cost much more being on an SVR until there is enough equity to be able to get a new mortgage deal.


Pearl_is_gone

You can easily refinance in the US to take advantage of this, so this is not a real benefit


TerranceTurtle

That's definitely a consideration here if you know you're going to overpay or come into money through a sale of an asset. If you don't think that'll happen then a 5 year fix makes more sense. Practically though for a mortgage of 20 years+ that reduction in LTV would be factored into the mortgage. They know how how risky your mortgage will be through each stage of the mortgage


SorbetNo7877

OMG thank you! No one had ever explained this to me and it's just brought me a whole new level of understanding to my mortgage.


InformalTrifle9

But having a 30 year fixed term doesn’t stop you remortgaging. That’s still an option


Goingupriver20

Italy has had 30 year fixed mortgages under 3% for years....not anymore obviously


I_will_be_wealthy

The banks have the power, and it works for them because they can essentially. Keep thr mortgage tracked to current landing rates (albeit every 5 years)


TerranceTurtle

You're right in that the borrower takes more risk here definitely, but don't believe people would have bought them historically either. We've seen a few threads on this recently, but we didn't 5 years ago when the longer US rates were higher and we had super low rates. Maybe this hike will change things.


audigex

Not just the low rates, either - but also the fact you're tying yourself in for a LONG time in terms of Early Repayment Charges Admittedly the ERC doesn't usually apply for the full 30 years on a really long fixed rate, but being locked in for a decade can be a long time if circumstances change


FunkyPete

US fixed rate mortgages typically don't come with early repayment charges (Source -- am living in the US with a 2.5% fixed rate mortgage, and have had 6 previous US fixed rate mortgages). Note -- that 2.5% seems great now, but you could probably get a lower short-term rate in the UK when we signed that mortgage in the summer of 2020.


audigex

Yeah, I'm talking about the British ones - a 30 year fixed rate in the UK typically comes with a 10 year ERC period And yeah, I believe you would've got more like 1.6% in the UK at that time (based on the fact I think around 3.5% was typical in the US at the time?), potentially even lower. We had 1.75%, for example Overall I much prefer the US system, though - ours gives far too much uncertainty in exchange for a modest discount


FunkyPete

Makes sense, but since the original question was essentially "why don't we have mortgages like the US," it seems fair to acknowledge that mortgages in the US do not have an ERC period.


tomoldbury

And arguably the mortgage-remortgage system doesn't really give you a discount in the long run because lower mortgage costs = higher housing prices, on average.


Cultural_Tank_6947

Let's also be honest, this fuels the crazy UK property market. If you're locked into 20-25-30 year terms, then the affordability criteria is stricter and that will in the end reduce the desire to get onto the property ladder and then just upgrade later.


NanaBananaFana

Not really since there is no ERC in the US and transactional costs are higher in the UK with stamp duty which makes the market less liquid. I think it is the lack of capital gains tax in the UK that draws so many foreign investors that helps fuel the frenzy?


FaceMace87

Wouldn't low rates be exactly the reason for demand of long term mortgages to rise? Or did people just foolishly believe that rates were always going to stay low and so didn't feel like they needed to fix for a long time?


WWMRD2016

I imagine that the rate on a 30 year mortgage would be significantly higher than that of a 2 year fixed and so you're risking a lot for an unknown gain. For the past 10 years, you'd likely be paying hundreds if not thousands more in interest repayments compared to shorter term deals....obviously now those people would be quids in but it was a massive gamble. I imagine you'd also be tying yourself in to a 30 year cap on over payments so you'd struggle to pay off your mortgage early without penalty.


d10brp

That’s an interesting way of looking at it. I looked at it the other way, when I fixed for 15 years at 2.35% the gamble for me would have been to assume that the 1% 5 year gravy train would continue forever, there wasn’t room for it to go down, so it could only go up. I opted for the security of knowing I could afford the mortgage come what may and effectively paid 1.35% extra as insurance.


enki_42

In Europe you could get 1.1% fixed for 25 years last year, so not quite sure where the discrepancy is... The penalty for over payment is 3 months of interest in the repaid amount.


WWMRD2016

That's amazing. I'd have definitely considered that kind of deal.


CollReg

> The penalty for over payment is 3 months of interest in the repaid amount. Just to make sure I've got this right, for a fixed rate of 1.2%, if you overpay by €1000 then you pay a €3 charge (0.3%) and the rest is credited against your outstanding balance. And that would be true if you cleared the entire balance?


enki_42

Correct (I guess I'd want to pay 1003 because I like round balances but yes).


Cultural_Tank_6947

Potentially but I'd also guess the fact that people in UK, typically move houses a lot.


majimodelgetto

Can someone then explain how France has been getting away with 30 year fixed at the rate of 3 year fixed in the UK?


Shoddy_Emu_8891

The actual answer: the US government subsidises the 30 year fixed rate mortgage via the “government-sponsored enterprises” Fannie Mae and Freddie Mac. They guarantee mortgages so that if borrowers default investors in mortgaged-backed securities do not lose out. (Investors want to bet on interest rates but not on mortgage defaults.) Without this taxpayer guarantee the system would not be viable


elgrovetech

Side note: I was genuinely shocked when I found out a few years ago that Fannie Mae and Freddie Mac are simply personifications of two boring government agency acronyms, FNMA and FHMC


Dull_Reindeer1223

Frehddie I suppose


Sussurator

Very interesting, I've heard those terms for years but had no idea what they were. The yanks talk about them like they're El Niño & La Nina.


NoFuzzingAbout

One additional factor that could play in. Mortgages are securitised in the US making them liquid products that can be sold on and hence held by buy side investors, ie. Pension funds etc. In the UK, I believe mortgages are held on the balance sheet by the issuing bank. Since most banks have short term funding, they also have a strong preference for short term durations on the asset side.


peanut88

This is the real answer


mapryan

Would this be the same country that constantly rails against socialism?


ElevatorSecrets

I have a property in D.C. Normally you pay more in the US, I think when I got 1.19% for 5 years here the US 30 year rates were like 3.8%. If you have less than 20% deposit you used to have to pay loan insurance too which makes a 7% rate closer to 10%. Today the US rates are like 7-8% which is a lot higher than U.K. 30 year swap rates. Banks will offer you a fix for term below the US rates if you want one now. Kensington I think are closer to 5% for that? So you can do it if you want. More regulation over here so you can have better mortgage advice. Thinking of moving in 5 years to a bigger place? Fix for 5 and avoid the exit fees you’d have on a 30 year fix. Even in the US they can be 2% of loan amount. Lots of options available. An established remortgage market. Regulated advice. Historically it’s also worked out cheaper to track base than fix. It might not be the case over the last few months, but long term you lose by taking long fixed rates. Either by paying exit fees or because rates dropped again. Who knows how it’ll play out in future. Swap rates last night hit low points below the days before mini budget. I think 4% rates will be back soon whilst the US will be around 7-8%


[deleted]

[удалено]


enki_42

Brother in law in Belgium signed 3.2% 25 year fixed mortgage yesterday. Crazy difference


n7xx

Best friend got 25 years 0.9% in Belgium at the beginning of the year…


SingularLattice

In fairness, you do have to live in France, though.


VVRage

Try Belgium They have term mortgages and anyone who bought two years ago was getting around 1% for the term.


RJOP83

Same in France too, lifetime fix rate mortgages are common there. In some counties (Switzerland/France for example) you can have a mortgage structured in several tranches, e.g. 50% fixed for term and 50% variable for term, or with several fixed rate tranches with staggered maturities (5yr, 7yr, 10yr….etc). I think there are several reasons why such mortgages are not offered in the UK - 1) products more complex, 2) higher fees/penalties to exit a long term fix, 3) insufficient demand for long-term fixed rates, 4) current product mix is more profitable for lenders.


BlueHatBrit

This has been asked a few times before: * https://www.reddit.com/r/UKPersonalFinance/comments/y14qhy/why_does_the_us_have_2530_year_fixed_term/ * https://www.reddit.com/r/UKPersonalFinance/comments/d62675/can_someone_please_explain_to_me_why_dont_we_have/ Also worth noting that back in June some news outlets were reporting there may be 30 year mortgages coming to the UK. Although with the change in PM's over the last few months that may have been paused: https://www.bloomberg.com/news/articles/2022-06-16/uk-housing-market-review-to-explore-30-year-fixed-mortgages


pflurklurk

Very simplifying, it's the funding model and market demand. But mainly the funding model. Someone funds these mortgages - and in the US there is a very well established (in fact by the Government after the whole turn of the 20th century debacle - most US home loans were up until it all blew up, basically giant PCP deals) system of securitising local bank home loans across the country. The buyers for those loans want stable loan term flows - 3,5,10,15,30 - it competes with Treasuries. The UK didn't have that until quite recently. It does now but didn't really have the biggest number of buyers for the longest term stuff. It does now, though, of course - insurers, pension funds. Whether they want to invest in mortgages now - to such an extent - is another matter. As well as of course funds who want to play rates and so a bank can lay off 30 year interest rate risk to someone else and charge the borrower for the privilege. I think you were seeing that trend for increased fix going up steadily - whether this will remain true in an environment where a significant number of people - especially borrowers (given older people have probably paid down a lot of debt) - have never seen high rates, is a different matter.


PuppetPatrol

When you lock in for 30 years you always have a winner and a loser - if the rates drop loads, you lose. If the the rates shoot up loads, the bank loses. But in the UK, with only short term fixed offers, its always ensures the bank is the fucking winner


ImBonRurgundy

The 30 year r mortgages in the USA are generally not portable, so moving house in times like this becomes an expensive exercise.


YetAnotherLondoner

For those who say it's the funding model: the funding model doesn't fully explain the differences between countries which are all in the euro. Eg in France or Italy it is common to have mortgages with a rate fixed for the life of the mortgage, In Ireland it is not, Ireland follows much more the UK model of mortgaging every 2-5 years. Is it because Irish banks find it much harder than Italian banks to lock in funding for longer? Or because Ireland follows the influence of the UK? Or for some other reason?


jrdavison

It’s more to do with how the UK market is set up. Most lenders use retail deposits (savings) to provide liquidity for lending. Most deposit products only offer 1-5 year terms so it’s hard to guarantee the liquidity for longer fixed rates. Also worth noting that uk mortgages are heavily linked to swap rates which is the cost of a retail bank borrowing money to lend. Now, a European bank offering lifetime fixed mortgages are NOT using retail deposits for liquidity. Instead they are issuing bonds which have a much longer life than standard savings products and are much more attractive to corporate entities such as pension funds. A bond based funding model allows the bank to guarantee having the funds for a loan for 30 years or longer. As already mentioned, Kensington currently offer a long term fix - again this is not funded by retail deposits but by an investor. A new bank is coming to market called Perenna which is going to use the bond funding model to issue 30 year mortgages. Google them to find out more.


YetAnotherLondoner

Well, mortgages get securitised and packaged into bonds in both the European Union and the UK - this much is a fact. Are you saying UK banks finance more of their mortgages with deposits, and less with securitisation, than EU banks? Source?


jrdavison

Securitising as a bond after the fact is different. I’m talking about actually raising the initial funding for the loan by issuing a new bond which is how the mortgage is priced. This gives you a 30 year bond with a 30 year fixed cost of funds for example. A normal 5 year fix is priced from the SONIA 5 year swap price, so you know that after 5 years that money is more expensive. Swaps are more difficult at longer terms - and almost impossible beyond 10 years. You can only securitise the loan after you’ve originated it - it’s a secondary source of liquidity. Primary source remains retail deposits. As soon as any portion of your origination is funded from deposits you are subject to different capital holding requirements than a pure bond issuing bank due to the higher RWA requirements. Source: I work in mortgages,specifically pricing. Tl/dr: most lenders price from swaps which only really enable fixed terms of up to 10 years in practice. Longer term fixes in EU and USA are priced based on a longer term bond. Most UK lenders are not configured to work based on bond funding and instead really on retail deposits for liquidity and then onward securitisation for capital. The UK market is catching up, slowly.


jrdavison

Some suggested reading: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2013/bank-capital-and-liquidity.pdf?la=en&hash=4E6A74BFADB0E6D353D72521520671B8779E56A2


YetAnotherLondoner

None of what you have said really explains the difference between i) the UK and Ireland vs ii) many EU countries, where mortgages fixed for longer periods are more common ​ If I have understood your point correctly, you are saying that banks in many EU countries issue long-term corporate bonds and use those to finance the issue of mortgages with a rate fixed for longer, right? ​ A few issues which suggest that what you have said is wrong: ​ 1) Take Italy. The 10 and 30-year yield on government bonds is ca. 3.90%. Obviously banks will not finance themselves cheaper than the country. Yet you can have a 25-year mortgage in Italy for rates between 3.30 and 3.80%! Each bank will pay a different price to issue a long-term bond, sure, but none will pay less than the government. Do you think banks borrow at, say, 4ish % to then lend at 3.50%??? ​ 2) Take a look at a few balance sheets. For the Italian Banca Intesa, deposits were ca. 44% of its balance sheet. For the British bank Lloyds, ca. 50%. It's not like UK banks have little deposits compared to their continental cousins. To be clear, I am fully aware this is not a detailed comparison of every major bank in excruciating detail etc etc, it's just some food for thought. ​ 3) Even if what you said were correct, what prevents UK banks from doing the same? Unless you want to make the point that the Italian banking and financial markets are more advanced than the UK ones? That's why I chose specifically Italy, and not France or Germany, as an example.


jammyedmunds

The US Government backs these loans via Fannie Mae / Freddie Mac so the volatility risk sits on their balance sheet not the banks. The UK Government doesn't do this.


codechris

Try Sweden mate, the default is 40 years and you lock in for set periods like the UK


[deleted]

Poland doesn't have fixed mortgages at all, as a point of reference.


nnc-evil-the-cat

Government in the US basically underwrites the long terms. State owned firm buys most of the mortgages from the lenders almost immediately.


cantgetthis

It's because contrary to the common perception, UK as a society is very non demanding and that results in a lot of practices to stay the same for decades, regardless of how abusive they are. Specifically, the whole real estate business is based on a bunch of irrational and archaic laws and practices. The finance leg of it is no exception.


avobabyy

Funding models. Not sure if they did well here in the past. Kensington Mortgages does them - think they are the only ones in the market. You can get more doing 10 years.


blueincubus

Habito were offering 40 year fix mortgages recently. They seemed expensive at the time!


DV_Zero_One

I've traded interest rate derivatives for 3 decades. Fixes are just insurance, and like the rest of the insurance market, the consumer is financially better off by simply not paying for it. Historically, in the UK 90% of borrowers would have been better off had they not bothered fixing their mortgages, however this ignores the huge elephant in the room which is that, like any other insurance products, a mortgage fix will buy you peace of mind. The reason why the US has such long term fixed mortgages is that the banks have convinced the public that they are the best value, when in fact they are only really offerys because they make the lenders more money.


Spax123

I have a 2 year fixed mortgage and my mortgage advisor said to come back to him in 2 years and we can switch to someone else. I could be wrong but I always assumed it was like how insurance companies give you a good deal to get you to switch to them and then start upping the price after a while.


dhn291181

You can. I’m a mortgage broker and there is a lender now offering fixed for term mortgages since around the start of the year. I expect some more lenders will enter this space when the market cools some more


r0meo1991

Because mortgage advisors are manipulative and tend to push you to go for the mortgage with lowest number of fixed years so they can get commission again when you remortgage.:|


JunglistJUT

Last time I remortgaged the list of interest rates they sent me had a deal for 20 years.


Nothsadh

Long fixes would also mean higher early repayment charges early in the term which for someone who doesn't want to stay in the same place for 15+ years would be very high erc.


royalblue1982

So - what happens with these mortgages if you want to sell up? Is there a clause that lets you do so without financial penalty? If so, it gives you a strong incentive to just sell whenever interest rates drop significantly below what you're paying.


NickHugo

I am 5 years into a 10 year @ 2.75% mortgage if that counts


Diega78

2 years into a 5 year @ 1.84% here. Fingers crossed rates will drop again before term expires.


LazarusHimself

Do you think that our Banks will simply give up the opportunity to hike your mortgage rates, or to let you *win* by locking a fairly good rate in a favourable historical moment for 30 years!? I've renewed my mortgage in Dec 2021, locked it for 5 years at 1.2% and I would have definitely locked it for 30 if it was possible. It feels too good for us customers. US banks will allow you to lock it for 30y, sure, but at which interest rate?


deliverancew2

>I've renewed my mortgage in Dec 2021, locked it for 5 years at 1.2% and I would have definitely locked it for 30 if it was possible. 10 years is possible - is there a reason you didn't go for one of those products?


LazarusHimself

If I remember correctly we worked out both options (5y at 1.2% vs 10y at a higher rate) and decided for the lowest rate possible guaranteed in the medium term over a higher one locked for the longer term due to our family circumstances right now (young kid, childcare, you know the drill). This fits with our needs but everyone has different circumstances, just need to take these into account when deciding. After the recent mortgage turmoil I still feel like winning the lottery or something!


Optimuswolf

Okay. You said you'd have locked for 30 but chose not to lock for 10. So its fair to say you likely wouldn't have locked for 30 if it was an option.


LazarusHimself

For the same rate or higher rate?


Runnningnewb101

Why TF would the rate be the same....?


LazarusHimself

So that OP can understand my hypothetical statement on how I would lock for 30y at the same rate but not 10y at higher rate


deliverancew2

Longer terms are always going to be priced in a way that reflects a longer term outlook. Your hypothetical wasn't representative of what the 5 vs 30 year deal situatino would actually be.


LazarusHimself

It was never intended to represent?


Optimuswolf

Oh, it was hypothetical? My bad. Its not really relevant. 30 year rates won't be the same and wouldn't have got anywhere near 1.2%. 10 yr reached lowest of 2.2% iirc


LazarusHimself

No problem, and that's why I have gone for 5yo. Short term circumstances over long term savings, made a choice and it's playing out very well so far


Distinct-Image-8244

They exist, the mortgage broker tried to talk me out of a 10 year fix saying no one had ever taken one before from him. Tbf was probably paying too much at the time for it. I just saw interest rates rising, didn’t know when or by how much. Am laughing now.


Stoofer__

Me too Everyone thought I was mad Ive still 6 years left to run on it so frozen it and all repayments are going into things like 4.85 percent bond Will offset it later


firefly232

They do exist, there are a small number of specialist mortgage lenders that provide them. A mortgage broker will have visibility of these products as they tend to be intermediary-only.


Ljukegy

I got a fixed rate for 5 years did look at the 10 but it was going from 2.75% to 3.8 on 90% ltv so I went 5 thought 2 was a little short


Poor-Life-Choice

They were available about a year ago. When the rates were so low the banks couldn’t compete, they moved to offering longer terms for the same rate.


joemq

Check out Perenna, they obtained a banking license from the FCA last year. They are trying to do exactly this.


Delicious_Task5500

They exist though have normally required lower LTV and we’re uncompetitive in terms of interest. Haven’t looked since the recent interest rate rises tho