Type: Fixed rate mortgage
Fixed term: Until June 30, 2016
Fixed rate: 5.79%
Minimum loan: £5,000
Maximum loan: Up to 85% of valuation subject to a maximum of £500,000, up to 80% of valuation subject to a maximum of £750,000
Income multiples: Based on affordability
Conditions: Capital repayments of up to 10% a year allowed without penalty in the fixed-rate period
Arrangement fee: £800 completion fee for loans up to £500,000 or 1% of the original loan for loans above £500,000, plus £199 booking fee
Redemption fee: 5% of the amount repaid in the first two years, 4% in year three, 3% in year four, 2% in year five
Introducer’s fee: Refer to lender
This intermediary deal from Leeds Building Society offers a 5.79 per cent fixed rate until June 30, 2016 for loans up to 85 per cent of valuation.
Paul White, consultant at Belgravia Insurance Consultants, says: “The ability to fix the rate while interest rates are at an historic low is of great help to consumers. The re-emergence of products with a high loan-to-valuation is a welcome sign that the market is stabilising.”
White thinks the absence of a higher lending charge is a useful feature of this mortgage. “Many products allow a 10 per cent a year repayment of capital, so it is good to see that this one does. The tapering of the early redemption charge is straightforward, while the £199 booking fee is fair and should not deter many borrowers.”
In White’s view, this product’s rate of 5.79 per cent is competitive in the five-year fix arena. “The £199 redemption fee is a little lower than the norm. For borrowings below £500,000, the £800 fee is competitive,” he says.
Discussing the less attractive features of the deal white says: “Even though the market seems to be easing, the capping of the loan at £500,000 for LTVs over 80 per cent might rule this product out for bigger loans. Otherwise, a £750,000 cap applies.
“At the highest level of borrowing, the maximum fee is £7,500, which would put it in the first quartile of its peer group for expenses. When the fix expires, the Leeds’ Reversionary rate at 5.69 per cent is significantly higher than the Natiowide’s 3.99 per cent reversionary rate and the Woolwich’s 3.49 per cent reversionary rate on five-year fixes.”
Identifying the main competition White says: “Long fixes are thin on the ground, but the main competitors will be the Woolwich’s 5.49 per cent fix till April 20, 2015, with a maximum loan of £1m and Nationwide’s 5.89 per cent five-year fix. This allows borrowings of up to £750,000 at 85 per cent LTV.”
Summing up, White says: “This product should only capture a small proportion of the long-term fix market, which in itself will be a niche area, as the restriction on the maximum loan will count against it.”
Suitability to market: Average
Competitiveness of rate: Average
Adviser remuneration: Average