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Product matters

Woolwich is one of the more recent recruits to the lifetime tracker market, which seems to be burgeoning as lenders seek new ways of retaining customers.

It cannot really be economic to lend at this margin, notwithstanding higher arrangement fees which only just offset the lender’s acquisition cost on fee-free remortgages such as these, so it must believe these customers represent fertile cross-selling opportunities.

Apart from the smaller loan, the Woolwich offering at just 19 basis points over base certainly represents a market-leading proposition compared with alternatives from Abbey, Bank of Scotland and Northern Rock to name a few. Combined with the free remortgage offer, it will undoubtedly capture a significant slice of this market.

I am not sure, however, that this sector is really that big. Most customers opting for these products are more sophisticated and view them as a fee option, given the absence of redemption penalties allowing them to wait until more attractive short-term deals become available. Interestingly, Woolwich has also followed the trend towards offering differing rate/arrangement fee combinations on the product although again I would expect the more sophisticated borrowers with bigger loans to see the advantages of the lowest-rate option.

Mark Chilton is chief executive at Purely Mortgages.

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