Type: Tracker mortgage
Tracker term: Three years
Tracker rate: 2.49% above the Bank of England base rate
Payable rate: 2.99%
Minimum loan: £6,000
Maximum loan: Up to 75% of valuation subject to a maximum of £550,000
Income multiples: Based on affordability
Conditions: One free valuation for properties valued up to £2.5m, £250 cashback towards legal costs, available for home purchase only
Arrangement fee: 1% of the original loan
Redemption fee: 2% of the amount repaid in the first three years, plus repayment of £250 cashback if mortgage repaid on or before December 2, 2012
Introducer’s fee: Refer to lender
This three-year tracker from Abbey For Intemediaries is available for loans up to 75 per cent of valuation up to £550,000. It tracks at 2.49 per cent above the Bank of England base rate, giving an initial pay rate of 2.99 per cent.
Discussing how this product is useful for advisers and their clients, Paul White, a consultant at Belgravia Insurance Consultants says: “The minimum loan of £6,000 is useful for smaller amounts to be raised. The free valuation for properties worth up to £2.5m is generous, covering most clients’ needs. As some conveyancers are working within the typical cashback amount of £250, this effectively provides free legal fees, unless the mortgagor wishes to appoint their own solicitors.”
White also feels that setting a maximum of £550,000 for the amount that can be borrowed is more competitive than the round half-a-million and he feels this should tip the balance in this product’s favour. “The 2 per cent redemption penalty before 2nd December 2012 is fair and clear to the borrower,” he says.
Turning to the weaker aspects of the deal, White says: “The ad valorem fee of 1 per cent on the maximum borrowing of £550,000 means a £5,500 arrangement fee, which is excessive for a mainstream mortgage like this one. This tends to cancel out the advantage of the free valuation on the more expensive properties,” he says.
White adds that restricting this product to purchases only, rather than remortgages as well, does not make sense if the maximum loan-to-valuation is a lowly 75 per cent.
Highlighting products that could provide the main competition, White says: “Accord’s 2.14 per cent above the Bank of England base rate is cheaper, but with a shorter benefit period until January 31, 2013, which is slightly over two years. This lender currently has a strong range of products, in that its three year tracker is also competitive at 2.34 per cent above BBR.
“Rather than selecting a tracker for a set period, the Woolwich offers a lifetime tracker at the cheaper rate of 2.89 per cent, with the added attraction of a lower redemption penalty of only 1 per cent, albeit for the longer timespan up to February 28, 2013.”
Summing up, White says that as some commentators are predicting the base rate to remain at 0.5 per cent for some time, the benefit of tracking that rate remains unclear to the borrower. “The market is therefore geared towards the lowest possible rate at the moment. Unfortunately, this product is not quite keen enough on its rate to bring in lots of business,” he says.
Suitability to market: Average
Competitiveness of rate: Average
Adviser remuneration: Average