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L&G shelves plans to offer long-term mortgages

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Legal & General has shelved plans to launch its own mortgage lender specialising in long-term fixed rate mortgages of 10 years or more.

L&G exited the mortgage lending market in 2002 when it sold its mortgage and deposit account business to Northern Rock.

L&G Bank and L&G Mortgage Services had combined 106,000 customers with £1.2bn in mortgages, £65m in personal loans and £1.2bn in retail deposits.

Earlier this year, L&G started to look into the feasibility of setting up its own mortgage lender.

L&G director of housing and public affairs Stephen Smith says: “It got a lot of traction internally because there is an interest in matching long-term annuity funding with long-term mortgage funding.

“But the conclusion was it wasn’t something for L&G at the moment. We were not convinced there is a mass market yet for long-term, 10-year plus, fixed rate mortgages in the UK. If we had a lender it would be pretty difficult to make it stack up doing just long-term fixed rates.”

John Charcol senior technical manager Ray Boulger says there is still the potential to create a market for long-term fixes, and insurers could be ideally placed to offer competitively priced 25-year deals.

He says: “It is a shame L&G decided to back off. Non-traditional sources of lending have a perfect opportunity right now to get involved in the mortgage market.” 

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