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Product matters

Alliance & Leicester has followed the rush to mimic Northern Rock’s Together mortgage, joining recent entrant Birmingham Midshires. Like existing schemes, it operates by offering a 95 per cent mortgage advance with up to an additional 30 per cent on an unsecured loan basis at the same rate and over the same repayment period.

The logic is that it allows first-time buyers, movers and remortgagors to not only buy the property but also get immediate funds for home improvements or essentials.

A&L is offering this product on a fixed-rate basis, with rates as low as 5.64 per cent over two years and 6.08 per cent over three or five years.

Advisers will need to decide how the various lenders’ products compare which is made more complex by both A&L and Northern Rock offering a range of interest rates with differing application fees.

Income multiples are reasonably generous at 4.75 plus one or four times joint although this may be less than Northern Rock, where multiples depend on their credit scoring system.

Overpayments of up to 10 per cent a year can be made without triggering the early repayment charge, which at 4 per cent of the amount overpaid is higher than Northern Rock but lower than Birmingham Midshires.

This is a welcome addition to an area which is likely to see many more entrants as lenders search for more ways to expand their sales windows.

Alan Lakey is partner at Highclere Financial Services.

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