Type: Fixed-rate mortgage
Fixed term: Until April 2, 2013
Fixed Rate: 6.19%
Minimum loan: £6,000
Maximum loan: Up to 90% of valuation subject to a maximum of £250,000
Income multiples: Based on affordability
Conditions: Capital repayments of up to 10% a year allowed without penalty in the fixed-rate period, available to home movers and first-time buyers only
Arrangement fee: £599 booking fee
Redemption fee: 3% of the amount repaid in the first two years, plus repayment of cashback if mortgage repaid on or before March 2, 2013
Introducer’s fee: Refer to lender
This mortgage is fixed at 6.19 per cent until April 2, 2013 and is available for loans up to 90 per cent of valuation within a £250,000 maximum.
Considering the useful features of this deal, Paul White, a consultant at Belgravia Insurance Consultants, immediately highlights the 90 per cent maximum loan-to-valuation. He says: “The key factor of this product is the high loan to value at 90 per cent Very few lenders are currently in this market, so Abbey faces little competition.”
White adds that the absence of a higher lending charge is welcome and points out that the 6.19 per cent fixed rate is identical to a product from NatWest Intermediary Solutions.
“Having a flat booking fee of £599 makes the Abbey For Intermediaries product competitive and the early redemption charge is clear,” he says.
Looking at the incentives offered with this deal, White feels the free valuation for a property up to £2.5m should cater for most clients. He adds that the £250 cashback at completion enables the broker to quote for the conveyancing as well, aiding his or her profitability.
Turning to the potential drawbacks of the mortgage, White says: “As this product is aimed at first-time buyers with a low deposit, the need to pay the booking fee upfront is a small issue, but is not a deal-breaker.” He adds that with a completion deadline of July 29 2011, there could be complications if delays develop in the property chain.
“Capping the mortgage at £250,000 may rule this product out in many circumstances, making the purchase price a lowly £277,000,” he says.
Discussing potential competitors, White says: “In the direct market, Cheltenham & Gloucester has a rate of 5.79 per cent, either as a tracker until approximately the same end date as the Abbey fixed rate, or a year longer if taken as a fixed rate.” He feels that the client may be inclined to bear the higher costs of the C&G deal, in return for that keener rate. “Indeed if they are borrowing more than £250,000, they have no choice,” he says.
White points out that the NatWest Intermediary Solutions deal he referred to earlier is fixed at 6.19 per cent until April 30, 2013 and is not capped at £250,000. “It has a far more generous limit of £1.5m,” he says.
Summing up, White says: “The loan cap on the Abbey deal has not been thought through, as many of its target market will aspire to owning a bigger property than the lender thinks.
“The superficially generous £2.5m property value cap for the free valuation is at odds with the loan cap, which is 10 per cent of that. If the booking fee could be added to the loan, that would increase the product’s marketability.”
He concludes that for the housing market to recover, we need more entrants to offer mortgages at 90 per cent LTV, forcing Abbey to target its products better.
Suitability to market: Average
Competitiveness of rate: Average
Adviser remuneration: Average