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A flexx approach to value

Coventry Building Society – Residential Flexx for Term

Type: Variable rate flexible mortgage

Mortgage term: Life of loan

Payable rate: 4.15%

Minimum loan: £1,500

Maximum loan: Up to 85% of valuation subject to a maximum of £400,000, up to 80% of valuation subject to a maximum of £750,000, up to 75% of valuation subject to a maximum of £1m

Income multiples: Based on affordability

Conditions: One free valuation up to £670, remortgage transfer service, available for properties in England, Wales, mainland Scotland and Northern Ireland.

Flexible features: Unlimited overpayments, payment holidays of up to three months a year after six months, interest calculated daily

Arrangement fee: £199 booking fee

Redemption fee: £125 admin fee

Introducer’s fee: Subject to negotiation

Tel: 0845 757 3612

This flexible mortgage from Coventry Intermediaries  is one of several new additions  to the lender’s residential product range. It is a variable rate deal which has a current pay rate of 4.15 per cent and is available for loans up to 85 per cent of valuation. A range of flexible features are offered, with the lack of an early redemption charge allowing unlimited overpayments to be made at any time during the mortgage term.

Putting the launch in to its market context Paul White, a consultant at Belgravia Insurance Consultants, says: “With Mervyn King stating that the Bank Base Rate will continue until the end of 2013, those borrowers who recently flocked to buy fixed rates with their attendant arrangement fees should have secured a low variable rate for term instead. As the APR on this product is 4.3 per cent and the pay rate 4.15 per cent, this shows the real value of this product.”

Discussing how the deal is useful to IFAs and their clients, White says: “The absence of an arrangement fee is another demonstration of the good value of this product. With a free mortgage valuation available upon remortgage up to a value of £670, this product is as close to fee- free as you can get.”

White adds that if the base rate situation changes unexpectedly, this product’s lack of early redemption charges helps with the number of options available to the borrower. “The £125 redemption fee is around the market average and sopresents no undue constraint to remortgaging away.”
White also feels the product’s maximum LTV of 85 per cent is generous considering the present market. He also highlights the product’s flexible features as useful. “There are no restrictions upon monthly overpayments or lump sums. Once six months’ payments have been made, a payment break of three months may be taken,” he says.
Moving to the potential drawbacks of the deal, White says:  “The £199 booking fee is low, but I wonder whether it is really necessary for the Coventry to charge it, when the pay rate is 3.65 per cent  above the base rate.”

Considering which products are likely to provide the Coventry with competition, White points out that the Leek United Building Society offers a tracker mortgage, with the first three years at 3 per cent cent above the Bank of England base rate.  This gives a current pay rate of 3.5 per cent and after the initial three years, the product switches to the lender’s standard variable rate, currently 5.19 per cent.

White also points out that the Leek United deal has a £100 booking fee plus a £895 application fee. He says: “ The refund of the valuation fee on the Leek United mortgage does not overcome the significantly higher fees ,together with a higher lending charge.”

White also points out that the Britannia Building Society has a term tracker at 3.69 per cent with a free valuation and free legals. “But there is an early redemption charge of 1 per cent in the first three years, during which time the borrower may need to seek the security of a fixed rate,” he says.

Summing up, White says: “Coventry has been lending throughout the financial crisis, which is to its credit.”
 Suitability to market: Good
Competitiveness of rate: Good
Flexibility: Good
Adviser remuneration: Average.
Overall 8/10



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