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Product matters

There are products that make headlines and there are good-value products. Only rarely are these the same.

Unfortunately, West Bromwich Building Society&#39s Brum Brum mortgage fits squarely into this presumption. This is one of those products that is full of gimmicks and short on value.

The Brum Brum in question is an MG Rover 25. For first-time buyers or remortgage customers, this unbelievable offer with “no catch” is to provide a car in return for a mortgage.

But the lender then charges its standard variable rate on the mortgage, with a 7 per cent redemption penalty for the first five years of the loan. This rather detracts from the “no catch” claim and, as we move into regulation, this is exactly the sort of description I believe should be eradicated from mortgage sales.

The MG Rover 25, with a book price of £7,850, is effectively a cashback relating to the mortgage. Even if you borrow the minimum loan of £90,000, this does not offer significant value unless you need a car, are happy with the five-year mortgage tie-in and do not like negotiating a better price.

If you borrow the maximum of £500,000, it equates to only 1.57 per cent, yet you are still tying yourself in to the SVR for five years.

Although a refund of valuation and free MPPI for six months are part of the package, in comparison with other normal products available on the market, this product does not seem to provide the consumer with value in any sense of the word.

Thankfully, this product is only available for direct applications. I cannot think why an adviser would be able to justify this as the most suitable product anyway.

Steve Smith is a mortgage executive at Hill Martin

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