# Interesting FT article on longer-term fixed rates in the UK (paywall)



## NoRegretsCoyote (25 Oct 2021)

Apparently the UK government is trying to push the industry toward offering more long-term fixed rate products. 

The reason for traditionally short terms is:



> the UK’s fondness for short-term deals is also a product of its underlying financing structure: most home loans are funded by deposits, the bulk of which can, in theory at least, be withdrawn at any time. The longer the fixed-rate term a bank lends for, the more it will need to rely on potentially expensive derivatives to structure it.



It mentions a new lender in Ireland (M&G) offering fixed-rate products. I had never heard of this, is it using a different brand name here?



> There are signs that non-banks may be keener to take up the long-fix challenge. M&G, the asset manager, recently launched 20-year mortgages in Ireland, traditionally similar to the UK in its mortgage structures.



I've always wanted to fix my mortgage for long. But the cost of doing so never seemed worth it so I've always stuck with one- or two-year fixed rates at a time.


----------



## Zebedee (25 Oct 2021)

I read this too. I’ve never heard of M&G in Ireland either. Maybe they are backing someone else?


----------



## Brendan Burgess (25 Oct 2021)

You can read the article if you google 

_Will the UK embrace long fixed-rate home loans?_​A link brings you to the paywall 

Brendan


----------



## Brendan Burgess (25 Oct 2021)

_A French borrower could get a 15-year loan from BNP Paribas for as little as 1.05 per cent._


----------



## Brendan Burgess (25 Oct 2021)

NoRegretsCoyote said:


> It mentions a new lender in Ireland (M&G) offering fixed-rate products.



They are behind Finance Ireland









						M&G backs Finance Ireland’s foray into mortgages
					

Rabobank advances plans to sell €3.2bn former ACC portfolio




					www.irishtimes.com
				




And here is M&G's press release









						M&G partners with Finance Ireland to bring long dated fixed rate mortgages to the Irish market
					

M&G partners with Finance Ireland to bring long dated fixed rate mortgages to the Irish market




					www.mandgplc.com
				




*London, 13 May 2021* – M&G today announces the launch of long dated fixed rate mortgages in Ireland with its origination partner Finance Ireland, Ireland’s largest non-bank lender. This will enable homeowners access to a range of long dated fixed rate mortgages of up to 20 years – a first for the Irish market.

M&G has been Finance Ireland’s long standing residential funding mortgage partner since 2018. The agreement has been made by the Specialty Finance team within M&G’s £67 billion Private & Alternative Assets division. M&G’s Specialty Finance team invests across the full spectrum of consumer loans, including mortgages, auto, credit card receivables, student and SME on behalf of institutional clients.

In Europe, the consumer lending market is dominated by the retail banks but due to regulatory changes resulting in banks managing capital and balance sheets more efficiently, asset managers have stepped up to provide long-term capital to this market on behalf of institutional investors seeking long-term income and diversification with a premium to the public markets.

*Billy Kane, CEO, Finance Ireland*, says: “I’ve been involved with the Irish mortgage market for over 30 years and believe that this is one of the most significant innovations made in that time. Introducing longer dated fixed rate mortgages will allow homeowners to benefit from the historically low interest rates that are currently available. Fixed terms combined with flexible features provide homeowners with exceptional certainty and are a stated priority of the Irish Government.”

*Jerome Henrion, Head of Specialty Finance, M&G Investments*, says: “By extending our partnership with Finance Ireland to offer these new and innovative products, Irish homeowners have the opportunity to secure fixed-rates over the long-term while retaining the flexibility that homeowners desire. In turn, our institutional clients, who are predominantly pension funds and insurance companies, will benefit from the attractive returns, regular income and security the mortgage market has historically provided.”


----------



## NoRegretsCoyote (25 Oct 2021)

Brendan Burgess said:


> _A French borrower could get a 15-year loan from BNP Paribas for as little as 1.05 per cent._


These are the full set of borrower-based rules in France. "DSTI" means "debt-service-to-disposable-income".



> Credit institutions and financing companies are recommended to ensure that......i) DSTI does not exceed 35% and ii) loan maturity does not exceed 25 years. While the maximum amortization period is fixed at 25 years, a grace period of up to 2 additional years can be added to these 25-years maturity in cases when there is a lag between the disbursement of the loan and the date when it is possible to move in (the lag being related to construction or heavy renovation works).



The "recommendation" will become legally binding from 2022. It's hard to be precise, but I would think at most income levels this will mean more generous lending than is allowed by Ireland's 3.5 LTI limit. No LTV limit at all from what I can tell.


----------

