PINK HOME LOANS
Freedom Finance FS 1 Year Discount
Up to 90% of valuation subject to a maximum of £300,000,
up to 75% of valuation subject to a maximum of £500,000
Based on affordability calculation and credit score
5% of amount repaid in year one, thereafter one month's notice or 1% of amount repaid
0.35% of original loan
Tel: 08707 590 170
Pink Home Loans' Freedom Finance FS 1 Year Discount has a 1 per cent during the first year of the mortgage term, giving a current payable rate of 4.83 per cent..
Charcol senior technical adviser Ray Boulger welcomes Freedom Finance's entrance to the intermediary market via Pink Home Loans. He adds: “However, it is disappointing to see a new lender using old methods we would like to see disappear from the market, such as requiring a month's notice or having to pay a penalty. It is also surprising to see a new lender not offering a 10 per cent a year penalty-free part-repayment facility.”
Boulger points out that the underlying rate tracks the Bank of England base rate plus 1.58 per cent,, giving a current underlying rate of 5.83 per cent. In his view, this is reasonable with most SVRs now around 6.25 per cent.
Boulger considers the product's best features. He says: “Income is assessed on affordability, which will open the door to more borrowers than a deal based on less than generous standard income multiples. The affordability calculation is helpful for borrowers needing a relatively large loan in relation to their income, particularly those on below average incomes and joint applicants.”
However, he feels the £385 arrangement fee is a little high and complains that the discount is only 1 per cent for 12 months. He says: “For borrowers who don't need above average income multiples this product is not competitive. The redemption charge is 5 per cent in the first year, which is totally out of proportion to the 1 per cent discount. It is disappointing for a new lender to also require a month's notice after this to avoid a 1 per cent penalty.”
Boulger does not anticipate much direct competition as most discounts are either for less than a year or for at least 2 years. He feels the main competition will be from other lenders offering discounts up to 2 years who also calculate the maximum loan on an affordability basis.
Suitability to market: Average
Competitiveness of mortgage rate: Poor
Adviser remuneration: Average