Coventry Building Society has created a five-year fixed-rate mortgage for first-time buyer at 90 per cent of valuation.
The new Flexx fixed first time buyer deal is fixed at 5.99 per cent until June 30, 2016 and is available only on a repayment basis. It has no arrangement fee but does have a £199 booking fee. There is no early redemption charge in the fixed-rate period, which allows borrowers to make unlimited overpayments or move to another product in the first five years without charge. Free valuation is included up to £670.
Coventry sees this product is unique and believes it stands out in a market where the majority of first-time buyer fixed rate are for two years. The lender says there is a lot of uncertainty about when interest rates will rise and by how much, so a five-year fixed rate option provides certainty of rate. Coventry says first-time buyers who choose a two-year fixed rate option could find the rate environment is very different when their fixed rate comes to an end in a couple of years.
It is possible to get a lower rate through branch only deals from lenders such as Nottingham and Britannia building societies which have £195 and £999 arrangement fees respectively. Both deals also have early redemption fees
Skipton Building Society offers the same rate as Coventry but its fees total £995 and early redemption charges apply in the fixed rate period. Defaqto Insight analyst for banking Kevin Bray says: “There are currently 70 five year fixed rate mortgages available that permit a maximum LTV of 90 per cent or higher. Ten are specifically targeted at first time buyers but mortgages available for house purchases are also available to first time buyers. This expands the choice for first time buyers seeking a 90 per cent LTV five year fixed rate mortgage to 41.”