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C&G fixes for greater affordability

Cheltenham & Gloucester

2-Year Fixed-Rate Plus

Type: Fixed-rate mortgage

Fixed term: Until August 31, 2010

Fixed rate: 6.69%

Minimum loan: £50,000

Maximum loan: Up to 90% subject to a maximum of £999,999, up to 80% for new-build properties

Income multiples: Based on affordability

Conditions: Free valuation and free legal fees for remortgages

Arrangement fee: £1,995 plus £99 application fee

Redemption fee: 3% of the amount repaid in year one, 2% in year two

Introducer’s fee: Refer to lender

Tel: 01452 373187

This two-year fixed-rate is aimed at people who want to borrow slightly more than allowed under Cheltenham & Gloucester’s standard affordability requirements.

Charcol technical manager Katie Tucker points out that this deal allows borrowers to take a higher loan amount than would otherwise be possible on their income, but paying a higher rate for it, as Cheltenham and Gloucester prices for risk. “Like for like on fees, C&G is charging an extra 0.3 per cent on the rate for this higher income multiple calculation, and the affordability calculator on its website gives a loan amount of around five times the borrower’s income instead of 4.5 times.”

Tucker likes the free valuation and legal fees, as these allow for an easier remortgage process, without increasing debt as much as adding fees or extra borrowing to the debt.
“C&G offers a higher procuration fee for this, which goes some way to remunerate the additional work involved with broking a mortgage that requires extended income multiples and discussion of budget.” she says.

Considering the downsides of the deal, Tucker says: “The rate is comparatively high and could stretch monthly affordability. “

Discussing alternative deals, Tucker says two-year fixed rates from the mainstream lenders such as Alliance and Leicester, Abbey, Halifax and Nationwide may be available at this income multiple. “A broker would need to carry out an agreement in principle on whichever offers the most likely multiple and rate combination,” she says.

BROKER RATINGS

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

Overall 6/10

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