Type: Offset tracker mortgage
Tracker term: Life of loan
Tracker rate: 0.48% above Bank of England base rate
Payable rate: 4.98%
Minimum loan: £25,001
Maximum loan: Up to 80% of valuation subject to a maximum of £2m
Income multiples: Up to four times principal income plus second or three times joint
Arrangement fee: £595
Redemption fee: None
Introducer’s fee: 0.5% of the original loan
The Woolwich’s Lifetime Offset Tracker is available for loans up to 80 per cent of valuation within a maximum of £2m. It tracks at 0.48 per cent above the Bank of England base rate for the life of the loan.
Belgravia Insurance Consultants consultant Paul White says: “Not so long ago, offset mortgages were generally more expensive than mainstream mortgages, but the Woolwich, and others, have managed to close the gap.
White points out that higher rate taxpayers can pay in bonuses and reduce their mortgages with this deal. “The maximum loan at £2m is generous, particularly as the Woolwich seems to be aiming this product at highly-paid workers with large mortgages, who get bonuses,” says White. He also feels the lack of redemption penalties is a plus. “As the mortgage tracks at 0.28 per cent above the Bank of England base rate, this is the opportunity for the IFA and client to plan for the medium to long-term. This proposition is simple and should be consistently fair value,” he says. He adds that the procuration fee at 0.5 per cent is attractive.
One of the things that White is concerned about is the fact that the Woolwich is behind this deal. “Speaking from past experience, there seemed to be little contact between the Credit and the Debit Departments, which is essential on a potentially complex product like this one.” he says.
Many mainstream mortgages, even fixed rate ones, allow 10 per cent of the mortgage balance to be paid down, without penalty. White feels this would be more straightforward than an offset mortgage. “The FSA does ask people “to think very carefully” before they move unsecured debt onto a secured basis. However, as long as the client’s debt is manageable, that should not be a problem,” he adds.
Providing that the property is not too expensive, White feels Hinckley & Rugby’s 4.65 per cent lifetime tracker is attractive as an alternative deal. “Up to a £1m valuation, the survey costs £199, which clients may prefer to pay upfront for the longer-term benefit of a lower rate. With the LTV capped at 75 per cent for borrowings up to £250,000, this also matches the profile of the sort of clients, the Woolwich may be trying to woo,” says White.
White concludes: “Woolwich will have to deliver a top-notch online proposition, because that is the way this client group will manage their financial affairs. Any glitches on the website could become a source of running discontent, which in turn reflects on the broker who recommended the product.”
Suitability to market: Good
Competitiveness of rate: Average
Adviser remuneration: Good