View more on these topics

Abbey steps up


Three-Year Stepped Fixed Rate

Type: Fixed-rate stepped mortgage

Fixed term: Until May 5, 2011

Fixed rate: 4.99% in year one, 5.69% in year two, 6.39% in year three

Minimum loan: £6,000

Maximum loan: Up to 90% of valuation subject to a maximum of £550,000

Income multiples: Based on affordability

Arrangement fee: £499

Redemption fee: 3% of the mortgage balance in the first three years

Introducer’s fee: Refer to lender

Tel: 0870 6000 367

Abbey’s three-year stepped fixed rate is pegged at 4.99 per cent in year one, 5.69 per cent in year two and 6.39 per cent in year three.

London & Country technical manager Richard Morea notes that the stepped rates give an average rate of 5.69 per cent. He points out that it is available up to 90 per cent LTV to £550,000 and carries a low fee of £499, which can be added to the loan.

“A stepped product would typically be good for borrowers whose income is limited at outset but have clearly defined increases over the stepped term, such as a trainee solicitor or other such professional, and who can clearly see that their future income will allow them to cover the annual rise in monthly repayments,” he says.

However, on the downside, he says: “With any stepped fixed rate there is a degree of uncertainty, for both applicant and broker, in whether the applicant’s income will actually keep pace with the mortgage cost as the rate increases. Abbey’s offering is no different. “

He reiterates his earlier observation that stepped rates will suit a small group of borrowers whose income is likely to rise at a higher than average rate, but he feels that in this case the opening rate of 4.99 per cent is probably not keen enough to overcome the uncertainty.

Scanning the market for potential competitors, Morea says: “There are currently very few stepped fixed rates on the market, and while this product does compare favourably with it’s peers, the main competition is likely to come from standard three year fixed rates.”

For a straight three-year fixed rate, he suggests the Post Office’s 5.48 per cent deal, which has a cheaper fee at £399 and is available up to 95 per cent with no higher lending charge. “Norwich & Peterborough can also beat the Abbey average with their 5.59 per cent deal, which also has a lower fee at £385. However if the borrower is prepared to opt for a fixed rate over two or five years, then there are lenders who can offer sub 5 per cent deals which may also prove to be attractive,” he says.


Suitability to market: Poor
Competitiveness of rate: Average
Flexibility: Average
Adviser remuneration: Good

Overall 5/10


Woodford takes the plunge

Leading fund manager Neil Woodford has forecast that UK house prices will fall by 8 to 10 per cent this year. In an investment analysis from Invesco Perpetual, he predicts that consumers will start reining in their borrowing and spending. He says a correction in house prices will begin to bring the house price/earnings ratio back to a more healthy level.

Clients round the world don’t want to pay by fee

An international study has found that fewer than 10 per cent of consumers are willing to pay for advice on insurance, mortgages and investments.The World Insurance Report by Capgemini Financial Services surveyed more than 11,000 customers in 10 countries.Only 8 per cent say they are willing to pay for advice on insurance policies and the […]

Sesame survives the sell-off

Sesame will stay in the Friends Provident fold as it gives the insurer a good insight into the adviser market.As part of its strategic review, Friends is to sell high-net-worth IFA firm Pantheon but will keep Sesame. Friends bought the two firms last May, paying £75m for Sesame and £33m for Pantheon.The life office says […]

1000 jobs at Northern Rock could go under Virgin’s proposal

Up to 1000 jobs could be cut at Northern Rock if Virgin’s proposal is accepted, it has emerged.The BBC has reported that Virgin has abandoned a commitment to no redundancies because the government-backed bonds to be issued by Northern ROck have to be repaid within a timetable of three years.This would cut down the stricken […]

What triggers the MPAA?

Jim Grant – Senior Product Insight & Technical Support Analyst There’s sometimes confusion around what triggers the money purchase annual allowance. Find out what does and what doesn’t trigger the MPAA. The money purchase annual allowance (MPAA) is a reduced annual allowance that can apply to contributions to defined contribution (DC) schemes. The following table […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm