12 Month mortgages explained

Matt Coulson from Heron

In conversation with… Matt at Heron Financial

In recent months the number of mortgage lenders offering rates for both purchase and remortgage deals for up to 12 months has increased and they’re providing that all-important certainty at a time of interest rate uncertainty.

We sat down with Matt Coulson, mortgage advisor and founder of Heron Financial who explained how these new 12-month fixed rate mortgages work, their benefits, and how this could help you climb to the next rung on the property ladder.


What is a 12-month mortgage offer and what are their benefits?

12 month mortgage offers empower borrowers to lock in an interest rate for purchase or remortgage from the point of offer for all applications, that will be valid for up to as long as 12 months.

Buyers essentially get certainty for a longer period. One thing the last 3-years post-covid has shown us is that curveballs can be thrown when it comes to the housing market, so having a 12-month mortgage offer, you can be reassured that if you complete in the timeframe, the agreed offer is what you will get.


What happens if the interest rate increases or decreases in this time?

Mortgage brokers more often than not, keep this under review. Having an offer in place doesn’t commit you to having to complete on that mortgage and the brokers will also keeping an eye on things to ensure they’re able to advise you if need be, prior to completion.  

If there is a change, for example the interest rates declining, like we have been seeing recently, you should be contacted and advised by your broker that, although you already have an offer in place, you could potentially benefit from reapplying for new deal.

Similarly, should interest rates increase from the time your bank offered your mortgage rate, the a 12 month mortgage offer would protect you from higher interest rates, until it was time to remortgage.


What banks or lenders are offering a 12-month mortgage (or a guaranteed extension)?

Lenders can on occasion shift their criteria regularly throughout the buying process, in line with political-economic events. However, well-known lenders that are generally known to be generous with their offers are Halifax and Skipton – who also have 12-month mortgage offers available to buyers of new build homes, which we have seen benefit several Countryside’s customers.


Why don’t all lenders offer a 12-month mortgage?

It comes down to funding and will depend on how the banks fund their mortgage lending. Many lenders fund from their own deposit and customers savings accounts – essentially the bank recycles the money and use it to fund their mortgage lending proposition. This way, the lenders can predict and project how much it will cost them. If it is the case some lenders don’t have this level of certainty, they may go out to the money markets to borrow money and lend it out, and if this is their chosen method, they aren’t as able to accurately predict what the cost of funding may be further down the line, so they may need to offer a shorter period.

At Countryside, we have a wide-range of properties available at our two north London developments, North West Quarter and New Avenue. Get in touch with our sales team today to explore your options. To find out more please visit: https://www.countrysidepartnerships.com/all-developments/london/north-west-quarter or https://www.countrysidepartnerships.com/all-developments/london/new-avenue or call a member of our sales consultants today.