Pricing behind demand for five-year fixed rate mortgages


Pricing and economic uncertainty have both played a part in the increased take-up of longer term fixed rate mortgages, according to Jeremy Duncombe, director of intermediary distribution at Accord Mortgages.

Mr Duncombe told FTAdviser: "I think the uncertainty in the market at the moment – whether that’s house prices, whether it’s the economy, Brexit, whatever it is – there is a lot of uncertainty out there and during that time of uncertainty, when inevitably the next move for rates people feel is upwards, then people are looking to fix for a longer period of time."

Pricing in particular has pushed people in the UK away from two-year fixed rate mortgages and towards their five-year equivalents, he said.

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Mr Duncombe said: "If you look at historically, two and five-year fixed rate pricing has been quite a long way apart. 

"Now you’re seeing those figures converge a lot more. So I think when brokers are talking to customers, they’re advising, 'with the uncertainty, why wouldn’t you take a five-year [fixed rate mortgage] when it’s almost the same price as a two-year?'."

He also pointed to the growing number of lenders moving into the five-year space, saying: "I think five-year availability is a lot higher than it has been."

Mr Duncombe joined Accord at the start of the year from Legal & General Mortgage Club.

He now plans to develop the intermediary distribution channel at the lender, saying: "My job is now to continue to develop the proposition Accord have got and I think increase our profile as well.

"Developing and growing our proposition will be around developing our sales team, so already I’ve brought in four new members of my senior management team, and we’ve increased our business development manager team."

Mr Duncombe also told brokers to watch out for the launch of Accord's new-build proposition, which was announced on 27 September, and saw Accord enter the Help to Buy market, offering Help to Buy equity loan mortgages at 75 per cent loan-to-value.

Mr Duncombe said Accord took a "common sense approach" to underwriting, saying "if a case doesn’t quite fit… I wouldn’t see us as a specialist lender, we’re very much a mainstream lender, but that allows slightly unusual cases at high street rates to come through".

Watch the video interview in full at the top of the page.