Type: Fixed-rate mortgage
Fixed term: Until January 2, 2012
Fixed rate: 5.79%
Minimum loan: £6,000
Maximum loan: Up to 80% of valuation subject to a maximum of £250,000
Income multiples: Based on affordability
Conditions: Capital repayments of up to 10% allowed without penalty subject to a £500 minimum, free valuation on properties valued up to £2.5m, free legal fees, available only for properties in England and Wales
Arrangement fee: £995
Redemption fee: 2% of amount repaid in the first two years, plus repayment of up to £400 for legal work if mortgage is repaid on or before October 2, 2011
Introducer’s fee: Refer to lender
This two-year fixed-rate mortgage from Abbey For Intermediaries is fixed at 5.79 per cent until January 2, 2012 and is available for loans of up to 80 per cent of valuation subject to a maximum of £250,000. It is part of the Homebuyer Plus range so standard legal work is free but borrowers must use Abbey’s panel of conveyancers. Borrowers also benefit from a free standard valuation on properties valued up to £2.5m
Putting this mortgage into its market context, London & Country Mortgages technical manager Richard Morea says: “Abbey’s introduction of some new products with higher loan-to-values at competitive rates is part of a general softening of LTVs from a number of lenders.”
Looking at its useful features, Morea says: “The product is available exclusively through brokers, and unusually for a purchase product, comes with free standard legal work.”
He thinks the fixed rate of 5.79 per cent is extremely competitive for a deal which has a maximum LTV of 80 per cent. “With a free valuation thrown in, this makes the package hard to beat,” he says.
Morea points out that the early repayment charge which applies during the fixed rate term is 3 per cent, plus the repayment of the Homebuyer Plus benefits. “However, the Abbey does allow for a standard 10 per cent overpayment without penalty,” he says.
Turning to the less attractive features of the mortgage Morea says: “The maximum loan of £250,000 is in keeping with Abbey’s other deals with LTVs of 80 per cent or higher, but does not stack up well with its competitors.” He thinks that borrowers could find the maximum loan restrictive.
Scanning the market for possible competitors, Morea highlights a two-year fixed rate mortgage from the Marsden Building Society that is available for loans up to £350,000. He says: “At 5.19 per cent, this is the market leader for loans of 80 per cent of valuation. It has an arrangement fee of £1,098, which is similar to the Abbey deal, and it offers a free valuation.” The arrangement fee comprises a £299 booking fee that is payable on application and a £799 arrangement fee that is either payable on application or added to the loan.
Morea expects Nationwide to also compete, as it can lend up to 85 per cent of valuation on its two-year fixed rate at 5.88 per cent. The Nationwide mortgage has an arrangement fee of £995 and a maximum loan of £500,000. This comprises a £99 non-refundable booking fee and a reservation fee of £896.
Suitability to market: Good
Competitiveness of rate: Good
Adviser remuneration: Good