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Best of both worlds from Woolwich

Woolwich

1 Year Fix & Track

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.”

BROKER RATINGS

Suitability to market: Average
Competitiveness of premiums: Good
Flexibility: Average
Charges: Good
Adviser remuneration: Good

Overall 7/10

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