Type: Adverse credit tracker mortgage
Tracker term: Until December 31, 2009
Tracker rate: 0.6% above the Bank of England base rate
Payable rate: 6.35%
Minimum loan: £1
Maximum loan: Up to 85% of valuation subject to a maximum of £350,000, up to 80% to £500,000
Income multiples: Based on affordability
Conditions: One free mortgage valuation up to £650, free remortgage transfer service, up to £1,000 in CCJs acceptable but none in the last six months, up to two months arrears on secured laons in the last 12 months but no more than one month’s arrears in the last six month, bankruptcy/IVA
acceptable if discharged/satisfied for at least 12 months
Flexible features: Overpayments, interest calculated daily
Arrangement fee: £800 plus £199 booking fee
Redemption fee: None
Introducer’s fee: Subject to negotiation
Tel: 0845 7573612
This tracker deal is aimed at borrowers with some adverse credit history. It tracks at 0.6% above the Bank of England base rate until the end of December 2009.
John Charcol product specialist Katie Tucker says: “This market is comparatively low in rate compared to the rest of the market’s offerings at this level of adversity. An APR of 7.2 per cent is comparable to many mainstream mortgages.”
One exceptional feature of this product in Tucker’s view is that it has no early repayment charges, which is excellent in the current market. “It means that, if fixed rates become more competitive as expected as a result of new, lower swap rates, borrowers can move to a fixed rate if they feel it will help them budget themselves back to an improved credit status. This product also has remortgage freebies which is valuable to sub-prime borrowers who are often not in a position to put costs on a credit card,” says Tucker.
Many lenders can offer a mortgage for similar criteria, but Tucker says the range on offer would depend on which aspects of the adversity the client has. “For most, the borrower would fall into the light or extra light ranges. The Godiva product, however is unusually generous to allow two arrears in the last 12 months, many lenders only allow one.”
Tucker says competition for this product is scarce as the rate is so low. “GMAC would consider someone of similar adversity on its light range, their 85 per cent two-year tracker with freebies is a far higher 2.65 per cent over base rate. It has a fee of £595. “Salt’s best offer on this level of adversity is a two year fixed rate at 6.99 per cent with an £895 fee, but this has no freebies and a whopping 6 per cent early redemption charge in the first two years,” says Tucker.
She adds that the flexibility means that brokers can actively encourage borrowers to overpay in order to improve their credit status as well as to reduce their loan-to-value ratio, which should be a priority for sub-prime borrowers moving forward as more lenders restrict their criteria. “This product is also priced against the Bank base rate, as opposed to Libor which Preferred, SPML and Platform price against, and which would have seen considerable change in the past few weeks,” she says.
Suitability to market: Good
Competitiveness of rate: Good
Adviser remuneration: Good