Is a Dutch style mortgage fairer?

by | Feb 12, 2024 | Moving, Property, Relocation

As you may have heard, UK borrowers are now able to get a ‘Dutch style’ mortgage for the first time.

Longer fixed-rate mortgages haven’t proved popular with UK borrowers in the past. However, the continental twist of these loans might make them more appealing.

What is a Dutch style mortgage?

A Dutch style mortgage is a long-term fixed-rate home loan where the interest rate decreases as the loan is paid off.

Traditionally, you would have to remortgage your property to access better rates. With a Dutch style loan, customers are automatically moved to a lower Loan to Value (LTV) band and lower interest rates as their home equity increases.

The available mortgages also don’t have any early repayment fees. Repaying your mortgage early is therefore more affordable while also cutting your interest rates.

Can I get a Dutch Mortgage?

There’s currently only one lender offering this style of Mortgage in the UK: April Mortgages.

April is currently only offering these loans to customers looking to remortgage their properties. However, April plans to offer loans for new buyers from late March or early April 2024. Rates on these loans start from 4.99%.

How long is a Dutch Mortgage?

April Mortgages are initially offering fixed-rate deals for five, seven, ten, twelve or fifteen years. A typical mortgage in the Netherlands can last as long as thirty years. The fixed-rate terms on offer then are a compromise between traditionally longer mainland mortgages and shorter-term loans generally preferred in the UK.

Is a Dutch style mortgage better?

April Mortgages claims that they are aiming to offer a fairer way to mortgage properties.

As April’s Commercial Director Tim Hague said: “Reducing rates to reflect borrowers’ reducing balances is simply a fairer way to treat customers… After all, the lower the mortgage balance, the lower the risk, and that should be reflected in the rate.”

The firm has also described the product as “a fixed rate where the rate actually falls”. Customers benefit from the protection from inflation offered by a fixed-rate loan while still getting the opportunity to switch to a lower rate as their LTV improves.

What do you think? Will you be applying for a Dutch style mortgage, or are you looking at some of the other alternative mortgage products on the market? Let us know using the links below!

 

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