April Mortgages’ 100% Fixed Rates
Written on 21 May 2025
The 100% LTV mortgage range from April Mortgages is a welcome addition to the no deposit mortgage market and is joined today by a new lender, Gable Mortgages, which has launched 5 year fixed rate 100% LTV products, suggesting that this sector of the market is set to benefit from more competition in the next few months.
The early repayment charges on April Mortgages’ 100% products are high, starting at 9%, but the fact that they are waived if the borrower redeems the mortgage as a result of selling the property is a key feature, meaning that no one will be locked into this mortgage simply because they want to move home.
This is particularly important to understand because two factors where April Mortgages’ criteria differs from the norm are that its mortgages are not portable and the lender will not give permission to let. Therefore, for example, this mortgage would not be suitable for anyone whose job might mean they could be posted abroad and in that event they would want to let the property during that time.
April offers a choice of a 10 year or 15 year fixed rate but the 10 year option looks far better value; it is difficult to justify paying 44 basis points more for the 15 year fix (6.43% v 5.99%). Also the 100% 10 year fixed rate is only 9 basis points above the 95% rate, whereas the differential on the 15 year rate is much higher at is 39 b.p. Furthermore, in year 11 the 15 year fix still has a 5% ERC, making a remortgage expensive, whereas ERCs will have ceased on the 10 year fix.
Assuming a £250,000 mortgage and a 30 year term anyone opting for the 15 year fix will pay £8,400 more over the first 10 years (£1,568 pm v £1,498pm) and have an outstanding balance after 10 years which is c.£2,378 higher than if the 10 year fix had been selected.
For the 15 year fix to end up cheaper than the 10 year fix over a 15 year term the rate payable on a 5 year fix in 10 years’ time would have to exceed 7%. Assuming no overpayments and an unchanged property value the LTV after 10 years would be below 85% and so it is reasonable to expect 5 year fixes to be available below 7%.
The 100% mortgage offered by Skipton to applicants who can demonstrate a 12 month history of rent payments is a 5 year fix at 5.37%, a cheaper rate than Gable’s offer and also with lower fees. Borrowers who qualify for both the April and Skipton 100% mortgages will be able to choose from a 5 year fix at 5.37% with Skipton (no application or completion fee) or a 5.99% 10 year fix with April (£1,190 fee but a free valuation up to £1m).
April’s maximum income multiple at 100% is only 4.5, despite it being prepared to offer up to 5.5x at 95% if income exceeds £50,000. Thus the maximum loan for a borrower with an income of £50,000 p.a. would be £275,000 at 95% but only £225,000 at 100% (18.2% less). Skipton will offer up to 4.75x income on its 100% product for borrowers with an income of at least £50,000. Gable will offer up to 5.5x income for joint key worker applicants and the definition of key worker seems fairly flexible!
In an environment where regulators are encouraging lenders to reduce stress rates, which many have already done (and in any case April uses pay rate to calculate affordability on fixes of at least 10 years), as April restricts its maximum LTI at 100% to 4.5x there may be scope to increase this multiple if it finds the performance of its 100% book compares well with lower LTVs. However, it may of course be constrained by the FPC’s LTI cap if the regulator continues to resist suggestions to amend or abolish its 15% limit on new loans in excess of 4.49x income.
Rather unusually April says in its press release “We have carefully designed this product with support from the regulator.” I wonder if that is code for: we had to limit the maximum LTI to 4.5 to keep the regulator happy!
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