Our Top Mortgage Products: May 2024

The dream of homeownership in the UK can feel increasingly out of reach. Rising house prices coupled with stricter lending requirements have made securing a mortgage a challenge, particularly for first-time buyers.

Recent interest rate hikes have added another layer of complexity. While these hikes aim to combat inflation, they also push up borrowing costs, impacting affordability. 

However, there is still hope!

This article delves into three unique mortgage products currently offered in the UK market. We’ll explore the intricacies of each option, highlighting their advantages and potential drawbacks, so you can make an informed decision.

At Key Solutions, we’re a whole of market broker, meaning we can help you compare deals from nearly every lender on the market, including new and interesting ones like these! If any of them tickle your fancy, make sure you get in touch with us to speak to our team of mortgage experts about them.

Own New: New builds made easier

Looking to buy a brand new home? Own New offers a unique mortgage scheme specifically designed for new build properties from a select group of developers (with national coverage, except for Northern Ireland).

There are two options under Own New:

  • Rate Reducer: This option takes a cash incentive (usually 3-5% of the purchase price) offered by the developer and uses it to reduce your interest rate for the first 2 or 5 years of your fixed-rate term. This can be a great way to save money upfront, especially since some initial rates were below 1% (although they’ve risen to the low 2s now).
  • Deposit Drop: This option also uses the developer’s cash incentive, but instead of lowering the interest rate, it allows you to borrow a higher amount. This could be helpful if you have a smaller deposit. However, there’s limited availability for Deposit Drop at the moment.

Here’s what to consider with Own New:

  • The Kick-out: After the initial fixed term (2 or 5 years), your interest rate might jump significantly, potentially increasing your monthly payments. Be sure to factor this potential increase into your budget.
  • Limited Options: Own New only applies to new builds from specific developers.

Accord’s 5k Deposit Mortgage: Get on the ladder faster

This mortgage from Accord is a great option for first-time buyers with a small deposit. It allows you to borrow up to 99% of the purchase price with a minimum deposit of just £5,000 for a maximum loan of £495K.

Here’s what to keep in mind:

  • Higher Risk: With such a low deposit, there’s a greater chance of falling into negative equity (owing more on your mortgage than your house is worth). This can happen if property prices fall. To mitigate this risk, Accord requires a higher credit score than usual.
  • Product Limitations: This mortgage can only be used for pre-owned houses, not flats or new builds. This is likely because flats and new builds are more susceptible to value fluctuations.
  • The Potential Lock-in: After 5 years, the product expires, and you might struggle to find another lender willing to offer a mortgage with such a high loan-to-value ratio (LTV). This could leave you stuck with Accord, with limited options for refinancing.

On the positive side: This option allows many first-time buyers to enter the property market sooner, despite having a smaller deposit! 

Perenna: Long-term fixed rates for stability seekers 

Perenna is a new lender offering a unique approach to mortgages. They specialise in ultra-long fixed-rate mortgages, with terms stretching from 20 to 40 years. This can provide peace of mind knowing your interest rate will be locked in for the entirety of your loan.

Here are some of Perenna’s key features:

  • Super-Sized Fixed Rates: Perenna offers fixed rates that last for the entire mortgage term, unlike the typical 2-5 year fixed terms offered by most lenders (similar to the US and European model).
  • Early Repayment Flexibility: You’ll only be charged an Early Repayment Charge (ERC) if you repay your mortgage within the first 5 years.
  • High Borrowing Potential: Perenna allows you to borrow up to 6 times your income, potentially enabling you to borrow more than with other lenders.
  • Age Flexibility: There’s no maximum age limit, meaning (on paper, not something that would likely be approved!) someone in their 60s could potentially take out a 40-year mortgage.

It’s important to note: Perenna is a relatively new lender, so there’s a less established track record compared to more traditional lenders.

Remember, a mortgage is a significant financial commitment. Before diving in, it’s crucial to understand the specifics of each product and how it aligns with your financial goals and risk tolerance. If you have any questions about the mortgage products you’ve discovered in this article, please reach out to our friendly team who will be more than happy to answer any questions you may have! 

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About Key Solutions

Here at Key Solutions we believe taking out a mortgage should be easy. Why shouldn’t it? So when people say buying a home or getting a mortgage is one of the most stressful things ever, we say, come and speak to us.

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