Melanie Spencer is head of MCI Mortgage Club

The government is keen to promote long-term fixed-rate mortgages and these will provide borrowers with more choice. The market should offer a wide range of options to suit all needs and while this is a niche product it could be suitable for some people.

For the borrower, the main advantage is that it gives certainty of knowing exactly what their interest rate will be over the entire life of the loan, and therefore the cost of their monthly repayments.

More borrowers are taking out 30- and even 40-year mortgage terms at two- or five-year fixed rates but they are at risk of higher repayments when they come to remortgage if interest rates go up.

Interest rates are low at the moment but, if they rise, borrowers may never have the opportunity to fix at such low rates again. Of course, no one knows what will happen to rates in future. Who would have thought back in March 2009 when Bank base rate fell to 0.5 per cent that rates would remain so low for so long?

Another advantage for borrowers is that they should be able to borrow more under a long-term fix. The FCA’s responsible lending guidelines state that lenders must apply a 3 per cent stress test when assessing the affordability of the borrower. This is to ensure that borrowers can repay if rates go up in the first five years of the loan, but that does not apply to longer fixed-rate mortgages. The rate won’t go up so borrowers don’t need to be stress tested, which means they would be able to take out a higher loan.

As long as these products have no early repayment charges or exit fees and are portable, I can see the attraction. If there is the option to overpay as well, even better.

Long-term fixes also remove the need to remortgage and the associated time and costs. I expect borrowers will go directly to lenders’ websites if they are interested in a 30- or 40-year fixed-rate mortgage because brokers are unlikely to want to promote these products.

In the US, 30-year fixed-rate mortgages are normal, but they have never really taken off here. Two new lenders have entered this market so they must think there will be demand for 30- and 40-year fixes. It will be interesting to see the take-up and if any more lenders follow them.

Ray Boulger is senior mortgage technical manager at John Charcol

Habito’s long-term fixed-rate concept has attractions, particularly no ERCs — pity the value is destroyed by the pricing.

Some prices can be compared to similar alternatives, such as the 2.99 per cent 10-year fixed rate to 60 per cent LTV.

Habito claims its mortgages are flexible, a much over-used term in mortgage marketing. However, the most flexible type of mortgage is an offset. Coventry offers a 10-year fixed-rate offset at 2.39 per cent up to 65 per cent LTV. Although ERCs would be payable on full redemption, unlimited ERC-free part-repayments are allowed, with a reborrow option. The fee of £999 is half Habito’s and Coventry offers a free valuation.

TSB offers a 10-year fix at 2.19 per cent with ERCs for only five years and no fee. Anyone expecting to redeem within five years prob-ably wouldn’t consider a long-term fix so ERCs for the first five years is a good compromise. But Coventry offers an ERC-free five-year fix at 2.09 per cent with a fee of only £499.

At the other end of the product range, the cheapest 40-year rate is 4.2 per cent up to 60 per cent LTV, with the 90 per cent rate indicated as high as 5.35 per cent. As these rates were stated in the press release to be “indicative” as of 8 March, I tried to check them on Habito’s website but was surprised to find no rates quoted.

Habito’s website makes the false claim that: “Habito One is the UK’s first-ever mortgage with a price that’s guaranteed for the whole term.” My parents bought a house over 60 years ago with a 25-year fixed-rate mortgage. More recently, Bear Sterns offered an ERC-free 25-year fixed rate in 1990, and other lenders, including Barclays, Nationwide and NatWest, offered 25-year fixes later that decade while Manchester BS had a 30-year fix.

Borrowers over 50 can access a lifetime fixed rate on a Rio and most lifetime mortgages offer a fixed rate for term, with rates starting under 3 per cent; both mortgage types could last even longer than 40 years.

A long-term fix around 3.0–3.25 per cent with ERCs for no more than five years would be attractive to many. Furthermore, as there would be no point in stressing the interest rate, it would be both logical and responsible to offer a higher maximum loan than on other mortgages.