Fixed term: Until January 31, 2012
Fixed rate: 3.99%
Minimum loan: £25,000
Maximum loan: Up to 70% of valuation subject to no maximum
Income multiples: Based on affordability
Conditions: Capital repayments up to 10% a year allowed without penalty
Arrangement fee: £995
Redemption fee: 3% of the amount repaid in the first two years
Introducer’s fee: Refer to lender
Tel: 08459 001110
This two-year fixed rate from RBS Intermediary Partners is available at 3.99 per cent for loans up to 70 per cent of valuation. It has a £999 arrangement fee and an early redemption charge of 3 per cent of the amount repaid will apply if the mortgage is repaid on or before December 31 2011.
Looking at how this mortgage could be good for IFAs and their clients, Belgravia Insurance Consultants consultant Paul White says: “The flat arrangement fee of £999 favours bigger loans and is reasonable for small ones.” He also likes the facility to overpay by 10 per cent a year as this allows the borrower to reduce the mortgage balance while interest rates are still low.
This deal calculates interest daily, which gets a positive response from White, as he considers this the modern way of calculating interest. White also highlights the fact that fees can be added to the mortgage advance, which may be useful to borrowers.
Turning to the less attractive features if the deal White says: “Once the mortgage offer has been issued, the borrower is tied into it. This is because the
arrangement fee is applied irrespective of whether it has been paid upfront or not.” White thinks that applying the arrangement fee in this way will compel the adviser to proceed with this mortgage, even if a more competitive product has been launched.
“If adding the fees to the loan breaches the strict 70 per cent loan-to-valuation, this is not allowed, which can cause complications in the event of a down-valuation. This means the adviser has to recalculate the whole package,” he says.
Identifying the main competition, White suggests the Alliance & Leicester 3.65 per cent fix until January 31, 2012. This is also available for loans up to 70 per cent of valuation and has an arrangement fee of £1,495 – £496 more than the RBS Intermediary Partners deal.
However, White notes that it provides a refund of the basic valuation fee upon completion. “This product covers against interest rate rises during the interim for an extra month, compared with the RBS Intermediary Partners product,” he says.
Another competitor is Northern Rock’s 3.69 per cent fixed rate remortgage until January 1, 2012. This deal is also available for loans up to 70 per cent of valuation and offers a range of flexible features, including overpayments, overpayments and payment holidays. It has an arrangement fee of £999, which can be added to the loan.
White notes that this deal also provides free legal fees. “Due to Government backing to this lender, nervous borrowers can paradoxically feel safer,” he says.
Summing up White says: “The rate on the RBS Intermediary Partners product is less competitive compared with the rest of the market.”
Suitability to market: Good
Competitiveness of rate: Poor
Adviser remuneration: Average