Type: Adverse credit fixed-rate mortgage
Fixed term: Until December 31, 2013
Fixed rate: 5.49%
Minimum loan: £25,001
Maximum loan: Up to 70% of valuation subject to a maximum of £300,000
Income multiples: Based on affordability
Conditions: One default up to £1,000 allowed in the last 24 months, but none in the last three months, one CCJ up to £750 allowed in the last 24 months but none in the last three months, up to one month’s arrears allowed in the last 36 months but none in the last 12 months, £250 cashback, free standard valuation and assessment fee subject to a £355 maximum, available for properties in England and Wales
Arrangement fee: £2,295
Redemption fee: 3% of the original loan in year one, 2% in year two
Introducer’s fee: Up to 0.5%
Tel: 0800 116 4385
Precise Mortgages has launched a new range of near prime deals for borrowers who may be struggling to get a mortgage from high street lenders. One of the deals in the range is the near prime home owner 2-year fixed, which is available to 70 per cent of valuation.
Putting this deal in to its market context, London & Country mortgages head of communications David Hollingworth says: “Only a few years ago the market was awash with products that would cater for any conceivable client situation. That is very different now and the high street lenders are now really only interested in the squeakiest applications.”
However, Hollingworth highlights a small number of lenders looking to develop products that will serve those that cannot tick all the boxes and who are recovering from prior credit issues. “Precise Mortgages features prominently in that group and the attraction of this deal will be very much based in its criteria,” he says.
Looking at the product in detail, Hollingworth says: “The rate of 5.49 per cent with a £2,295 fee may not look initially appealing for a two-year fix but the ability to consider applicants that have had had a history of defaults, arrears or CCJs is clearly the draw here.”
Hollingworth points out that the deal also offers incentives of a £250 cashback and a free valuation, which he says will certainly help with set up costs. “This product offers up to 70 per cent LTV, but other rates are available at a higher LTV too,” he says.
Turning to the less attractive aspects of the deal, Hollingworth says: “The market for those customers falling outside the narrow boundaries of today’s mortgage market is so small that it is really difficult to take issue with any product catering for anything out of the ordinary. “The fee is quite big, but many borrowers will want to keep the rate down, and it is also countered by the cashback and free valuation.”
Discussing possible competitors, Hollingworth says: “The lenders that will come up against Precise are bound to be Kensington, GE Money and Platform. Each lender offers different criteria and the right choice will tend to come down to the individual client circumstances. Some may go further in one area but be slightly tighter in another.”
Hollingworth adds that GE Money’s specialist near prime GEM2 product offers a two-year fixed rate at 5.34 per cent with a £1,995 fee.
“It has lower rates for those with a better credit profile too. Kensington’s prime one range offers a remortgage 2-year fix at 5.74 per cent up to 75 per cent LTV. This has a £1,499 fee, with free valuation and legal work.
Summing up, Hollingworth says: “The sub-prime market reached epic proportions in 2007 and clearly will now be a very different animal. Products are now priced for risk and so will carry higher rates. However there are customers getting back on their feet that will benefit from the products that lenders like Precise are developing.”
Suitability to market: Good
Competitiveness of rate: Good
Adviser remuneration: Good