By John Reynolds on Wednesday 29 December 2021
The generous terms of the Habito One mortgage will likely be appealing to first-time buyers but are likely to raise concerns about people taking on huge debt amid economic uncertainty.
Mortgages for up to seven times an individual’s income are being offered by digital mortgage provider Habito.
The London-based startup has posted details about its new mortgage offering on its website, saying surging house prices have “left too many people priced out of buying the home they want”.
It added: “Our answer: let people borrow more, and close that gap between wages and house prices. Then fix their monthly mortgage payments forever, so they have certainty and security about what they’re paying until they’re mortgage-free.”
The mortgage terms are only available to those who take out one of Habito’s long-term fixed-rate mortgages, called Habito One, which allows borrowers to lock their monthly repayments at the same level for between 10 and 40 years.
Those eligible for the mortgage must also meet certain criteria, including fronting up a 10 per cent deposit of the purchase price of the property. Property prices available under the mortgage are between £50,000 and £10m.
Individuals will have to earn a minimum basic salary of £25,000 if they work in any of these jobs: firefighter, nurse, paramedic, doctor, police, accountant, barrister, teacher, engineer, lawyer, dentist, architect, surveyor or vet to be eligible for the mortgage.
If they don’t work in those jobs, they will need to earn £75,000 or more to be eligible for the generous terms.
It is open to couples buying jointly but only one of them will be able to borrow seven times their income; the multiple for the other income will be restricted to five.
Interest rates on the mortgages start at 2.99 per cent.
Traditionally, a typical maximum income multiple available for a mortgage in the UK is around 4.5 times a salary.
The Habito One mortgage is likely to raise concerns about people taking on massive debt amid economic uncertainty.
James Daley, of the consumer group Fairer Finance, told The Sunday Times: "The most important thing if Habito start doing this is they need to make sure that they are lending in a way that is affordable for borrowers.
“I do think it’s a dangerous moment. We could have seen this emerge a few years ago, but the timing when we appear to be in a time of rising interest rates doesn’t seem the best. If they get it wrong, they’ll be the face of the next borrowing crisis.”
Daniel Hegarty, Habito’s chief executive and founder, said: “As a lender that considers every applicant’s case individually we’re confident that with suitable criteria in place, in the right circumstances, eligible customers can safely and securely boost their borrowing to buy the home that truly suits their needs and their life plans.
“Fixed-for-life mortgages are already popular in other parts of the world, including [the US] and Europe, and we agree with the British government that longer-term fixed-rate mortgages can help steady the housing market by providing more certainty to borrowers.”