Type: Flexible capped-rate tracker mortgage
Tracker term: Three years
Tracker rate: 0.34% above the Bank of England base rate
Capped term: Three years
Capped rate: 6.34%
Payable rate: 6.09%
Minimum loan: £5,000
Maximum loan: Up to 95% of valuation subject to a maximum of £400,000, up to 90% of valuation subject to a maximum of £500,000, up to 85% of valuation subject to a maximum of £750,000, up to 80% 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, free legal fees through Skipton home conveyancing service and free valuation for remortgages
Flexible features: Overpayments, payment holidays, interest calculated daily
Arrangement fee: £599
Redemption fee: 2% in year one, 1% in years two and three
Introducer’s fee: Subject to negotiation
Tel: 0800 876 6010
This deal tracks at 0.34 per cent above the base rate for three years and is capped at 6.34 per cent during that period.
Belgravia Insurance Consultants consultant Paul White thinks Skipton has launched a so-so product, where the pricing is too high. He believes this proves guarantees are expensive.
Looking at the positive aspects of this deal White says: “The income multiples are reasonable, with the indication that Skipton will consider income stretches based on affordability. The valuation scales are reasonably priced, but with the average house costing £300,000, a typical valuation would be £325.”
In White’s view, the early redemption charges are not crippling, so the exit would be fairly cheap. “I doubt that very many applications will be received in excess of 90 per cent LTV as the higher lending is charged back onto the amount above 75 per cent at 8.95 per cent. The facility to add this to the loan is welcome, but would be little used,” he says.
White finds the remortgage package of free legal fees and free valuation very attractive, particularly for properties below £500,000.
“The ability to overpay 10 per cent of the original mortgage balance distinguishes this product from those lenders who will only allow 10 per cent repayment of the outstanding balance,” says White. He adds that the £599 arrangement fee is very welcome considering fees can be as high as 3.25 per cent.
Turning to the potential drawbacks of the deal White says: “With a further 0.25 per cent increase in interest rates looming before reaching the top of the cycle, the cap of 6.34 per cent is unlikely to be breached, therefore only very nervous clients will want that belt and braces assurance.” He also complains that the rate of this deal is quite high.
Discussing the competition White says: “The Furness Building Society has an excellent remortgage product with a three year tracker discount at 5.55 per cent, although it caps the advance at £250,000 and needs 50 per cent equity to challenge the Skipton’s income multiples. It also offers free legal fees, but with a more expensive valuation than Skipton.”
White concludes: “This product best suits mortgagors with properties in the medium price range and with modest mortgages, who want to save money on the remortgage process. I see a greater appreciation for this in the direct market, where the remortgagor does not have to write a cheque,” he says.
Suitability to market: Average
Competitiveness of rate: Poor
Adviser remuneration: Average