Type: One-year fixed mortgage then reverts to two- year tracker mortgage
Fixed term: One year until April 30, 2010
Fixed rate: 2.29%
Tracker rate: Base rate plus 2.29% for the remaining term of the mortgage
Tracker pay rate: Currently 3.79%
Tracker term: Two years until April 30, 2012
Minimum loan: £200,000
Maximum loan: 60% loan to value up to £500,000
Income multiples: Ability to repay
Conditions: Available with switch & save,where customers can remortgage without paying legal or valuation fees
Flexible features: Overpay by up to 10% a year without incurring an early repayment charge during the overall mortgage period
Arrangement fee: £995
Redemption fee: 2% of the balance repaid until April 30, 2012
Tel: 0845 070 1567
Bestinvest head of mortgages Peter O’Donovan believes this mortgage is good in that it offers a very low fixed rate when base rate is also low and a competitive tracker rate when that expires.
He says the short tie-in of three years appears to be the norm for tracker deals and that the charges are respectable at £995. For remortgages there is the normal free package of valuation and legal fees. Also, he feels adviser the 2 per cent early redemption charge is not particularly excessive.
Turning to less attractive features of the Woolwich product, O’Donovan specifically dislikes the minimum loan of £200,000 and maximum loan to value of 60 per cent are fairly limiting.
He says: “Borrowers will be attracted by the low fixed rate and may not consider the changes and probable increases to monthly payments in the third year”.
He points out that the tracker will kick in when rates are increasing again.
The main competition for the Woolwich mortgage are Clydesdale Bank’s 2 year fix at 3.69 per cent and Alliance & Leicester 2 year fix at 3.59 per cent via Legal & General.
Summing up, O’Donovan says it is good to see a low fixed rate but “it is a shame the deal is tempered by a variable rate that could put the borrower in difficulties on affordability if not properly discussed.”
Suitability to market: Average
Competitiveness of premiums: Good
Adviser remuneration: Good