GMAC-RFC has set up an adverse product that it claims offers the UK’s first-ever rate/ redemption swap.
The deal, called Merc, is at base rate minus 0.01 per cent until September 2010, which then rises to base rate plus 1.99 per cent, with a £2,995 arrangement fee. But if the base rate increases, the 3 per cent early redemption fee, which is in place until September 2010, will reduce by the same percentage as the Bank of England’s rise.
London & Country head of communications David Hollingworth says the rate is very competitive but brokers should factor in the “high” arrangement fee.
He does not think the rate/ redemption swap makes a difference to the deal.
He says: “I am not sure who the swap will be attractive to as the rate is good as there is no overhanging ERC so people are free to go elsewhere anyway after 2010. To be fair, the ERC is not a negative but it is a mainstream deal for those with an adverse credit history and not something prime borrowers will go for.”