Type: Discounted-rate offset mortgage
Discounted term: Until October 31, 2013
Payable rate: 4.49%
Minimum loan: £150,000 in England and Wales, £100,000 in Scotland
Maximum loan: Up to 90% of valuation subject to a maximum of £500,000
Income multiples: Based on affordability
Conditions: Capital repayments of up to 10% a year allowed without penalty in the discount period
Arrangement fee: £999
Redemption fee: 3% of the amount repaid in year one, 2% in year two
Introducer’s fee: 0.3% of the original loan
This product is available only to first-time buyers within eligible professions such accountants, barristers, chartered surveyors, doctors, pilots and vets.
Looking in detail at the mortgage, London & Country Mortgages head of communications David Hollingworth says: “The feature that immediately catches the eye with this product is the maximum loan to value of 90 per cent of the purchase price. The beleaguered first-time buyer has been struggling to meet the tougher deposit requirements but gradually there are improvements as more lenders enter the higher LTV market.”
Hollingworth notes that more lenders have started to offer 90 per cent deals, but most will be on a fixed rate basis. “This product offers a very good variable rate of 4.49 per cent, with what has become a very typical fee of £999 to first-time buyers that also have a professional qualification.”
In Hollingworth’s view, the ability to offset savings against the mortgage as well as overpay up to 10 per cent a year without penalty is a feature likely to appeal to that professional profile.
Considering the potential drawbacks, Hollingworth says: “It’s hard to level criticism at a product pushing out to 90 per cent LTV for first time buyers. This product is more narrowly targeted at those that are in certain eligible professions, so inevitably that will limit the availability. It is a discounted rate rather than being pegged directly to the base rate but these are not critical issues considering the limited market.”
Hollingworth highlights the Clydesdale deal’s position as a market leader in the 90 per cent 2-year discount market. “Mansfield Building Society offers a two-year discount at a rate of 4.59 per cent to 90 per cent LTV, with a £599 fee. Furness will certainly compete with its 90 per cent three-year discount at just 3.99 per cent with no fee.
“However, there will be plenty of competition from the fixed rate products at higher LTV. These are bound to attract those first time buyers keen to know where they stand,” he says.
Summing up, Hollingworth says: “It’s great to see Clydesdale enter this market. It is a welcome addition, especially in view of its ability to take a flexible approach to underwriting for the right case.”
Suitability to market: Good
Competitiveness of rate: Good
Adviser remuneration: Good