John Charcol offers interest rate protection
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John Charcol has launched the Interest Rate Protector, an interest rate cap that protects borrowers with large mortgages, whether residential, buy-to-let or commercial, from rising rates.
It allows a borrower to choose the level at which to apply the cap and also for how long they wish to buy the protection, and is particularly suitable for those borrowers already on a cheap variable rate, whether because they are tracking UK Bank Rate, 3 month Libor in sterling or any other major currency, or are on a low Standard Variable Rate.
Ray Boulger, senior technical manager at John Charcol, says: “Unless you are the proud owner of a crystal ball, knowing what the future for interest rates looks like is all but impossible. What we do know however is that we are in challenging times with plenty of known unknowns.
“With many borrowers currently enjoying the benefits of an ultra low interest rate environment, those on a variable rate risk some tough times ahead when rates, as they simply have to at some stage, rise. History and common sense suggests locking into a fixed rate is the way to protect against a rise in interest rates, but The Interest Rate Protector provides a different and often cheaper way to buy protection.”
It says some scenarios where the Interest Rate Protector would be a viable option if:
- The borrower is currently paying a low lifetime tracker rate or a cheap SVR linked to Bank Rate, i.e. the 2.5% rate of Nationwide, Cheltenham & Gloucester, Lloyds TSB and Intelligent Finance.
- If they are unable to remortgage to a good fixed rate because of a lack of equity.
- BTL landlords who are unable to protect their payments due to high gearing and/or an inadequate rental income to meet lenders’ current criteria.
Readers' comments (2)
Anonymous | 6 Jul 2010 3:18 pm
This insurance product is expensive and only available for mortgages over £500k.
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Richard | 6 Jul 2010 5:05 pm
It is relatively expensive and would only be an option for deals over £500 000 anyway. Its a very useful tool when looking at BTL portfolio and I have used it already externally from Charcol. It can be written off against accountants and even resold as a commodity on the open market. So yes it doesnt suit all and it is a lump sum insurance product but it could very well stop portfolios going bust if base rate does rise quickly etc. better to protect your assets if you can than to let them be taken off you long term because the rates have increased and you cant offload..
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