Type: Fixed-rate mortgage
Fixed term: Until November 30, 2018
Fixed rate: 5.49%
Minimum loan: no minimum
Maximum loan: Up to 85% of valuation subject to a maximum of £500,000
Income multiples: Based on affordability
Conditions: Capital repayments of up to 10% a year allowed without penalty in the fixed-rate period, free valuation and free legal fees for remortgages
Arrangement fee: None
Redemption fee: 6% of the amount repaid in the first two years, 5% in years three and four, 4% in years five and six, 3% in year seven plus interest to the end of the month
Introducer’s fee: Subject to negotiation
Tel: 0800 87 66 010
Skipton Intermediaries has recently launched two seven-year fixed rate mortgages, one of which is fixed at 5.49 per cent for loans up to 85 per cent of valuation. The firm believes there is a place in the market for longer-term fixed rates for borrowers who want certainty of their repayments over a specific period, protection from potential fluctuations in interest rates and who expect to remain in their homes for a considerable time.
Discussing trends in the fixed-rate mortgage market London & Country Mortgages head of communications David Hollingworth says: “Fixed rates have been getting increasingly competitive and we have also seen a resurgence in the number of longer-term fixed-rates on offer. Borrowers keen to take advantage of the record low in base rates have the option to lock into a fixed rate not just for a few years, but for seven years.” He points out that some deals are even longer, allowing borrowers to fix for 10 years.
Hollingworth notes that Skipton is one of the lenders to recognise that there could be some appeal in the longer-term fixed-rate market. He adds that Skipton has also been prepared to offer rates at higher loan to valuation.
Looking in detail at how this mortgage could be useful to IFAs and their clients, Hollingworth says: “This deal offers a good long term rate for those with a deposit of 15 per cent, which remains a relatively high LTV. The deal also benefits from no arrangement fee and those remortgaging also qualify for a free valuation and free legal work.”
Discussing the less attractive features of the mortgage, Hollingworth says: “Long-term fixed rates can sound like a good idea but many borrowers will be hesitant about locking in for so long.
“The Skipton deal does offer the flexibility to overpay by up to 10 per cent of the outstanding balance each year but there are penalties within the seven-year fixed rate period.”
Hollingworth points out that a downside is if the borrower needs to review their mortgage they can port it to another property, but there is no guarantee that the lender can fulfil the new lending requirement. “That is a general issue relating to long term deals not specifically Skipton but it will limit the take up,” says Hollingworth.
Identifying the main competition that Skipton is likely to face, Hollingworth says: “There’s not a great deal playing in this part of the market. Chelsea Building Society offers some long-term rates and has just launched a seven-year deal at 5.29 per cent up to 90 per cent LTV. But this is only available to customers in a branch, not even over the phone.”
Summing up, Hollingworth says: “I think long-term fixes will remain of niche interest, but it is good to have options available to fulfil that demand. Skipton scores again on identifying and getting involved in areas of the market where choice remains limited.”
Suitability to market: Average
Competitiveness of rate: Good
Adviser remuneration: Good