Coventry’s seven-year fix is both stunning and interesting, but what a shame stamp duty killed off its family mortgage
Summer is a notoriously difficult time for the market, battling against a generally slower period. At least this year we have enjoyed the considerable highs of Team GB in Rio. And with football back on our screens, we switch from watching Olympians – pushing themselves to the limit, overcoming hardships and being away from families for months – to the antics of overpaid prima donnas, who fall over if a blade of grass brushes their shins.
Anyway, summer seems to have been busier than many thought it would and the good news is, with rates staying low and affordability calculators improving, the rest of this year looks pretty enticing.
We have also had some positive noises where Brexit is concerned, with an Ipsos Mori poll suggesting we are now markedly less pessimistic about the whole thing. Say one thing about the Brits: we like to make a drama out of a crisis before there is a crisis but, when faced with one, we get on with things and deal with it all very well.
Meanwhile, the press has had a field day on the Government’s Help to Buy Isa bonus, which, it transpires, is not actually available until completion. This means it does not help those who need to access the money to put down a deposit.
Of course, for many these days this is not an issue but clarity is everything and some have been caught out, especially over new-build purchases – the very things these Help to Buy schemes were designed to support. We look forward to some clearer proposals in the Autumn Statement.
In the markets, swap rates have risen slightly in the past two weeks.
2-year money is up 0.04% at 0.43%
3-year money is up 0.04% at 0.43%
5-year money is up 0.07% at 0.50%
10-year money is up 0.04% at 0.73%
On to the product world and Nationwide is the latest to cut its stress-test rate, from 6.99 per cent to 6.74 per cent, after lenders such as Barclays set the pace. This will of course help marginal borrowers.
Talking of Barclays, it has more great rate offerings, including a five-year fixed buy-to-let remortgage product to 50 per cent LTV at just 2.85 per cent, as well as joining the seven-year fixed party priced from 2.09 per cent – the same as for its residential five-year fixes.
The seven-year fixed party began with Coventry offering its stunning 1.99 per cent product up to 50 per cent LTV. It is a really interesting offering for those not prepared to go to 10 years. It would be even better if penalties were only within five years but Coventry has done well to keep these to just 1 per cent in the past four years.
Metro Bank has also gone large and gets a medal for its new rates, including a five-year fixed at 1.99 per cent to 65 per cent LTV and at 2.49 per cent to 85 per cent LTV.
Meanwhile, the AA has driven into the mortgage market with its product range (another Bank of Ireland-backed one), which comes with – surprise surprise – free home emergency and repair cover, as well as central heating emergency repair cover for 12 months and a 15 per cent discount on AA home insurance.
While I like the increased competition, I do not like all the add-ons on mortgages, which in some consumers’ minds distort whether the product is any good.
Elsewhere, it was a shame to see Coventry abandon its family mortgage over the stamp duty issues. With parents and guardians seemingly being hit with increased stamp duty that is meant to deter landlords, it is just another casualty.
In the buy-to-let world, Axis Bank has led the way with a new series of fixed rates, the highlight being a five-year fix at 3.99 per cent with a 1.5 per cent fee. The key to this product is not only the rental calculated at pay rate but the fact the early repayment penalties run for only three years – exactly the type of innovative ideas we like.
Accord has cut all its five-year fixed buy-to-let rates by 0.3 per cent while Virgin Money’s buy-to-let rental stress test has now reduced to 125 per cent at 5.74 per cent. Fleet also has an improved rental calculation at 125 per cent at 5.14 per cent.
Not to be outdone, Aldermore has released a 3.18 per cent five-year buy-to-let fix with a 1.5 per cent arrangement fee, with the rental calculated at 3.98 per cent.
Andrew Montlake is director at Coreco