Type: Flexible fixed rate mortgage
Fixed term: Until September 30, 2013
Fixed rate: 4.25%
Minimum loan: £1,000
Maximum loan: Up to 85% of valuation subject to a maximum of £750,000, interest-only loans available up to 75% of valuation subject to a £500,000 maximum
Income multiples: Based on affordability
Conditions: One free standard valuation up to £670, remortgage transfer service
Flexible features: Overpayments, payment holidays of up to three months a year available after the first six months, interest calculated daily
Arrangement fee: £800 plus £199 booking fee
Redemption fee: £125 administration fee
Introducer’s fee: Subject to negotiation
Tel: 0845 7573612
Coventry Intermediaries’ 4.25 per cent flexx fixed to 30.09.13 is part of a range of two, three and five-year residential fixed-rate mortgages that have no early redemption charges. The company says the range was introduce becausemany borrowers are looking for the security of a fixed rate with flexibility to overpay or switch products later on without paying early redemption charges.
The 4.25 per cent flexx fixed to 30.09.13 deal is available for loans up to 85 per cent of valuation and will charge only a £125 administration fee if it is repaid in full in the fixed-rate period.
Highclere Financial Services partner Alan Lakey sees this an excellent initiative from Coventry, which he believes is securing a position as one of the industry innovators. He says: “Coventry has brought out a suite of fixed rates, including buy-to-let versions, which have no early repayment penalties. The economic and interest rate outlook is unpredictable and many borrowers like the comfort of fixing their outgoings, but the trade-off is being locked into an arrangement with potentially high exit penalties.
“Coventry offers the perfect option for those with this mindset and, let’s not kid ourselves, the likelihood of borrowers jumping ship for a cheaper option is limited. So the Coventry has been very clever in offering a facility that is unlikely to be used overmuch.”
Considering how this mortgage could be useful to advisers and their clients, Lakey says: “The 4.25 per cent rate is available up to 85 per cent LTV, but if interest only is required the LTV falls to 75 per cent. Also, it is not that far above the 3.99 per cent rate offered by Accord on its 85 per cent LTV two- year fix.”
Lakey points out that the mortgage is also available for remortgagors, offering free legal fees and a free standard valuation. “Like the purchase product, is has a £199 booking fee and £800 arrangement fee that can be added. Procuration fees for advisers are around 0.32 per cent, which is not untypical in today’s market.”
Discussing the potential drawbacks of the deal, Lakey says: “Two year fixes are almost certainly bad value compared to the three, four and five year fixes available. Coventry also offers no penalty three and five year fixes, so there is something for everybody. The interest-only limitation is particularly irritating as the Coventry, like most other lenders, fails to distinguish between borrowers with extensive investment portfolios and those who have little provision for eventual repayment.”
Lakey says the Newcastle Building Society offers a similar no-penalty two-year fix at 4.19 per cent up to 80 per cent of valuation. This mortgage is direct only and is available for loans of £350,000 to 80 per cent LTV and £500,000 to 75 per cent LTV. Unlimited overpayments are available due to its lack of early redemption charge and interest is calculated daily, but there are no other flexible features.
Lakey points out that in the buy-to-let market, where Coventry is also offering fixed rates without early redemption charges, Kent Reliance Building Society has a 4.99 per cent two-year fixed with no early redemption charge. But this is available only through selected intermediaries.
Suitability to market: Good
Competitiveness of rate: Good
Adviser remuneration: Good