Type: Fixed-rate mortgage
Fixed term: Until March 31, 2017
Fixed rate: 3.89%
Minimum loan: £1,000
Maximum loan: Up to 65% of valuation subject to a maximum of £1m
Income multiples: Based on affordability
Conditions: One free valuation up to £670, free remortgage transfer service
Flexible features: Overpayments, payment holidays of up to three months a year, interest calculated daily
Arrangement fee: £800 plus £199 booking fee
Redemption fee: None
Introducer’s fee: Subject to negotiation
Tel: 0845 757 3612
Coventry Building Society has launched a five-year fixed rate at 3.89 per cent for loans up to 65 per cent of valuation to a maximum of £1m. This deal has no early redemption fee, so it enables borrowers to make unlimited overpayments. This mortgage also allows payment holidays and interest is calculated on a daily basis. Incentives include one free valuation up to £670 and a free remortgage transfer service is provided, offering free legal fees for borrowers who are remortgaging.
Discussing the Coventry Building Society, Highclere Financial Services partner Alan Lakey says: “The Coventry has shown itself to be a forward-thinking and innovative lender and this attitude has resulted in exceptional growth in recent years. It is more cautious than many other lenders and this vigilance enables the company to regularly offer competitive products.
Lakey points out that this five-year fixed rate is again among the cheapest available, but he adds that the Coventry’s caution results in loans being limited to 65 per cent LTV.
Considering the attractive features of this deal, Lakey says:“Free valuation and arrangement fees of £999 for both purchase and remortgage make this an attractive proposition. The remortgage product also offers free legal fees, making it attractive to low risk borrowers.
“However, the most important aspect of this product is the lack of any early repayment fee. Those potential borrowers fearful of committing to a five-year fix in case they downsize will be delighted by this product.”
Assessing the maximum loan relative to other lenders, Lakey says: “Loans are available to £1m, again a plus compared to £500,000 with the Cambridge Building Society and £750,000 with Accord.”
Turning to the less appealing aspects of the deal, Lakey observes that the Coventry uses a decremental income assessment for older borrowers, which reflects as a maximum three times income for terms below 15 years. “This is progressive with income multiples reducing further for older ages. I am advised that this applies equally to investment backed and repayment loans, which mitigates against common sense as it impacts unfairly on existing borrowers using endowments or Isas as repayment mechanisms.”
Additionally, unlike other lenders, the Coventry does not allow any non-repayment application unless the existing loan is already on this basis. Lakey regards this as another policy that defies logic.
Identifying the potential competition, Lakey points out that Nationwide, Accord and Northern Rock offer lower rates with more generous LTVs. “Aligned with more generous underwriting, particularly for older borrowers, this makes them potent adversaries, particularly Northern Rock’s latest fee free offerings. Additionally, Coventry itself is offering an attractive 3.58 per cent with a 4 per cent early repayment penalty.”
Summing up, Lakey says: “The Coventry continues with good quality products and also continues with its approach of focusing its efforts on the lower-risk end of the market.”
Suitability to market: Good
Competitiveness of rate: Good
Adviser remuneration: Good