Type: Offset tracker mortgage
Tracker term: Life of loan
Tracker rate: 2.99% above the Barclays Bank base rate
Payable rate: 3.49%
Minimum loan: £5,000
Maximum loan: Up to 70% of valuation subject to a maximum of £1m
Income multiples: Based on affordability
Flexible features: Overpayments, interest calculated daily, offset facility,lump sum withdrawals through mortgage reserve facility
Arrangement fee: £1,199
Conditions: Free legal fees or £200 cashback for mortgages through switchand save optionRedemption fee: 1% of the original loan if mortgage repaid in full in firstthree years
Introducer¹s fee: Subject to negotiation
Tel: 0845 070 1567
This offset tracker follows the Barclays Bank base rate, which is usually the same as the Bank of England base rate, for the life of the loan.
BestInvest head of mortgages Peter O¹Donovan points out that this is amarket leading pay rate which takes advantage of the current low interest rates. “The increased maximum loan and loan-to-valuation is good, as well asthe flexibility for unlimited overpayments, as long as the mortgage is notfully redeemed in first three years,” he says.
O’Donovan notes that the arrangement fee is slightly higher than previously charged for this type of deal, but he adds that it is not excessive. “The mortgage reserve is tempting for clients who may wish quick access to funds in the future for home improvements. The amount of the reserve can be increased at a later date at the same rate.”
He regards the early redemption charge of 1 per cent as low, so clients can get out without too big a cost.
Adviser remuneration is seen as in line with the market. “The remortgage incentives are the usual ones, but they areimportant,” he says.
Turning to the less appealing features of the deal O’Donovan says: “The rate is not capped so clients may find themselves paying a high variable rate in years two to three. There is a three-year tie-in and Woolwich has controversially added a £150 withdrawal fee, but this should not be an issue to 99 per cent of applicants,” he says.
O’Donovan can find little competition for this product. “For loans above £500,000, Abbey and Scottish Widows have offset products. Below £500,000,you can add Intelligent Finance and a few smaller building societies.”
Summing up, O’Donovan says: ³This is an excellent product but clients need to be informed over possible rate increases over the next few years which could lead to repayment issues.
“Overall, with the initial reserve and opportunity to apply for more, Woolwich has the most flexible product available at the best rate.”
Suitability to market: Good
Competitiveness of rate: Good
Adviser remuneration: Good