Woolwich aims to exploit prime niches

Woolwich is making a marked effort to rejuvenate its position in the lending market and its strategy is showing signs of success.

Although less than perfect of late, its service levels have improved enough to make it a contender again.

It has approached the market in an interesting way, operating in only the prime and buy-to-let markets. These sectors have become ultracompetitive in recent years and consequently are tough arenas to prosper in.

But rather than attempt to trade blows with the competition in the hotly contested and still high volume areas of two-year fixed and tracker rates, Woolwich has attempted to come up with products that offer something different.

Its lifetime tracker rates continue to provide an attractive package with excellent margins over the base rate, coupled with no arrangement fees and remortgage incentives. In addition, they carry no early repayment charges at any time.

They are attractive propositions for clients with more modest mortgages seeking long-term value and keen to avoid the two-year hunt for new deals along with its associated costs.

And Woolwich recently launched another product that while squarely aimed at prime borrowers is likely to appeal to a niche audience within that sector. Again, the foundation of the product is the long-term value offered by an attractive lifetime tracker at 0.39% above the base rate.

But having recognised consumer demand for the peace of mind provided by fixed rates, the deal commences at 5.39% fixed for one year. It then reverts to the tracker rate from year two and carries an early repayment charge for the following three years.

This product would suit borrowers who feel there may be further rate rises this year before they start to fall again.

However, even if their prediction is wrong, they can still take advantage of a drop-lock facility and choose another fixed rate to switch onto without incurring early repayment charges after year one.

This isn’t the first time we’ve seen lenders offer this type of facility. Scarborough, Portman and Nationwide have all offered similar options to switch to fixed rates from trackers. While it’s a nice option to have, the downside is that the fix has to be selected from the range available at the time, so clients face the dilemma of whether to fix for longer periods.

Nonetheless, the ability to alter products dependent on market conditions carries value. Although it isn’t going to fly off the shelves, the deal is a neat offering and shows how providers can bring something new to the table.