Type: Fixed-rate mortgage
Fixed term: Until January 31, 2013
Fixed rate: 5.79%
Minimum loan: £5,000
Maximum loan: Up to 85% of valuation subject to a maximum of £1m
Income multiples: Based on affordability
Conditions: Capital repayments of up to 10% a year allowed without penalty in the fixed-rate period, free valuation, free legal fees for remortgages below £500,000
Arrangement fee: None
Redemption fee: 3% of the amount repaid in year one, 2% in year two
Introducer’s fee: Refer to lender
This two-year fixed-rate mortgage is available for loans of up to 85 per cent of valuation to a £1m maximum. It can be taken out for home purchase and remortgages, with no arrangement fees.
Looking at how this mortgage is good for IFAs and their clients London & Country head of communications David Hollingworth says: “Any new product that goes up to 85 per cent of the property value is going to be a welcome addition in the current market. The other selling point of this deal is the fee structure.” Hollingworth points out that there is no product fee. “Cheltenham & Gloucester even waives its standard application fee of £99. For those remortgaging, there is the usual incentive of free valuation and free legal work to take out switching cost.”
Hollingworth adds that the product’s flexibility extends to the standard 10 per cent a year overpayment facility without incurring any penalty, which he says is often more than enough for most borrowers. “C&G’s service and criteria also remains a positive,” he says.
Discussing the potential drawbacks of the mortgage Hollingworth’s main gripe is the rate. He says: “Higher LTV products have been improving in recent months and so there are more options with better pricing in the market. The rate on the C&G deal does put it some way down the list, even factoring in the lack of set up costs.”
Considering which lenders will provide the main competition, Hollingworth says: “The Mortgage Works offers a low rate of 3.69 per cent at 85 per cent LTV although the fee packs a punch at 2 per cent of the loan amount. However, Yorkshire Building Society offers a rate of 4.19 per cent with a smaller fee of £495 and Post Office has 4.99 per cent with no fee – both also offer free valuation and free legal work for remortgage.” He also points out that many of the deals have some fees but the rates are markedly lower than the C&G deal, which he thinks will unfortunately reduce its appeal.
Summing up, Hollingworth says: “It is great that C&G is putting together options at the higher LTV brackets that provide help with costs. An improvement in the rate would make the deal very attractive. Brokers are well versed in the criteria and service that C&G has to offer and it would not need to offer the very lowest rate in the market to broaden its audience.”
Suitability to market: Good
Competitiveness of rate: Poor
Adviser remuneration: Good