Black says:“The Coventry is one of the most active mortgage lenders and maintains an extensive mortgage range which has for some time included its Flexx offerings. These are variable rate mortgages – which are not linked to the bank base rate – and have modest arrangement/booking fees and no early repayment charges.
“Mortgages without ERCs make up about 6 per cent of available mortgages so there’s clearly a niche market for them. But I can’t help thinking that if that’s what a borrower is after then it might be preferable to use an offset mortgage without an ERC to take advantage of the offset’s inherent tax advantages and enhanced flexibility. It’s also worth noting that many mortgages which do have ERCs will allow partial dispensation on overpayments of up to, say, 10 per cent of the mortgage balance each year.
“Another issue that points towards this being a niche mortgage is that when people think about taking out a new mortgage, the choice of initial rate type almost invariably centres around either fixed or base rate tracker mortgages as these rates can’t be changed on the whim of the lender during their initial rate periods. Those in the market will be aware of a number of lenders increasing their standard variable rates over the course of the last two years so it’s clearly a potential issue of which to be aware.
“Looking at the bare details a mortgage permitting up to 85 per cent LTV with a rate of 4.15 per cent and a £199 fee looks to be an attractive proposition. As an alternative Coventry also offers a 3.99 per cent rate, which has a £999 fee. Borrowers who want to avoid mortgages with an ERC might also want to look at HSBC’s lifetime tracker at 3.49 per cent above the bank base rate, in other words a 3.99 per cent initial rate, with no arrangement fee. This mortgage is also available for loans of up to 85 per cent of valuation. HSBC’s mortgage is only available direct but it, and the two Coventry mortgages, offer valuation and legal fee incentives.
“The Penrith Building Society has a variable rate mortgage at 4.15 per cent with no fee that will go up to 90 per cent LTV for properties in Cumbria. It also offers a valuation and a legal fee incentive for remortgages.
“Virtually every fixed-rate mortgage available – with the exception of one from the Coventry and another from the Newcastle Building Society – has an ERC and for a similar level of fee at 85 per cent LTV you can get a two-year fixed rate at 3.99 per cent, a three-year fixed rate at 4.19 per cent or a five-year fixed rate at 4.29 per cent.
“Those looking at base rate trackers, again at 85 per cent LTV with a similar level of fee, can get an initial pay rate of 3.54 per cent – in other words bank base rate plus 3.04 per cent – for a two-year tracker; 4.59 per cent for a three-year tracker or the aforementioned HSBC lifetime tracker at 3.99 per cent.”