Type: Fixed-rate mortgage for first-time buyers
Fixed term: Five years
Fixed rate: 5.89%
Minimum loan: 1,000
Maximum loan: Up to 95% of valuation subject to no maximum
Income multiples: Up to 4.25 times principal income plus second or 3.25 times joint
Conditions: 1,500 cashback, 25 charged if the societys buildings & contents insurance is not taken, one free valuation
Flexible features: Overpayments, underpayments, payment holidays, interest calculated daily
Arrangement fee: 345
Redemption fee: 5% of mortgage balance in first three years, 4% in year four, 3% in year five
Introducers fee: None
Tel: 0845 300 2522
Charcol senior technical adviser Ray Boulger points out that Norwich & Peterborough no longer imposes a higher lending charge on any of its products, which he sees as a particularly good feature for first time buyers. He calculates the combination of no HLC and free valuation as worth about 0.4 per cent a year.
Looking at the product in more detail Boulger highlights the cashback. He says: “Having a good cashback up front in exchange for a higher interest rate will be very useful for borrowers struggling to find a 5 per cent deposit. The 1,500 cashback is equivalent to a reduction of 1 per cent a year in the rate for a 30,000 mortgage or 0.5 per cent a year on a 60,000 mortgage. This product excellent value for mortgages up to about 60,000.”
However, Boulger warns that as the cashback is a flat rate rather than a percentage, the smaller the loan the better as it gets progressively more uncompetitive for larger loans, despite being free of a higher lending charge to 95 per cent of valuation. He adds: ” The cashback is paid after rather that on completion, which means it cant be easily used to cover some of the house purchase costs.”
Boulger thinks the income multiples are very good up to 95 per cent of valuation. He says: “As with all its products N&P offers a 10 per cent a year early redemption charge, free part repayment facility, with payment holidays available from any overpayments.
Considering which deals will compete Boulger suggests the Bristol & West five year fix at a lower rate of 5.05 per cent. This comes with a free valuation, but no cashback and interest is calculated annually. He also cites Co-op Banks flexible 5 year fix at 5.19 per cent but this offers no free valuation or cashback.
Finally he mentions Northern Rocks fully flexible 5 year fix at 5.29 per cent, which has a 750 cashback, but no free valuation and a high arrangement fee of 695.
Suitability to market: Good
Competitiveness of mortgage rate: Poor