Type: Tracker mortgage
Tracker term: Until January 31, 2012
Tracker rate: 4.29% above the Bank of England base rate
Payable rate: 4.79%
Minimum loan: £25,000
Maximum loan: Up to 90% of valuation subject to a maximum of £500,000, up to 85% of valuation subject to a maximum of £1m, up to 75% of valuation subject to no maximum
Income multiples: Based on affordability
Conditions: Capital repayments of up to 10% a year allowed without penalty, up to 80% of valuation for new build houses, up to 75% of valuation for new build flats
Arrangement fee: £999
Redemption fee: 3% of the amount repaid in the first two years
Introducer’s fee: Refer to lender
Tel: 08459 001110
This tracker mortgage from RBS Intermediary Partners is available for loans up to 90 per cent of valuation. It tracks at 4.29 per cent above the Bank of England base rate until January 31, 2012.
Putting this deal in to its market context, London & Country Mortgages technical manager Richard Morea says: “With less than a handful of schemes, the market for borrowing at 90 per cent loan-to-valuation is so tight that any new deal is a bonus to borrowers. With bank rate expected to remain low, tracker deals have replaced fixes as the deal of choice, so this RBS deal should be popular.”
Highlighting the positive features of the product, Morea regards the tracking margin of 4.29 per cent above the base rate as very competitive for this limited market. He adds that the £999 arrangement fee and 10 per cent a year overpayment facility are typical features of many products.
Turning to the potential drawbacks, Morea says: “The tracking margin is competitive, but most lenders are reluctant to lend at 90 per cent LTV, so competition is weak. If bank rate remains low the payable rate will remain attractive, but if the inevitable rises come within the early repayment period, borrowers could quickly find the deal becoming expensive.
Assessing the main competition, Morea notes that RBS will provide some competition with its direct product exclusively for first time buyers. “This offers a lower tracking margin at 4.19 per cent above the base rate, and carries no arrangement fee, but loans are limited to £150,000.
“Some borrowers may be tempted to choose a fixed rate, as they will pay a premium of over 1 per cent at the outset, but bank rate movement could quickly erode the savings offered by the tracker.
Suitability to market: Good
Competitiveness of rate: Good
Adviser remuneration: Good