Saffron and Aldermore have spotted gaps in the market and come up with innovative products for first-time buyers, which is great. The same can’t be said for buy-to-let where rates and fee choices are limited
Swaps dropped slightly last week. Three-month LIBOR is up 0.01% at 0.89%.
1-year money is unchanged at 0.94%
2-year money is down 0.04% at 1.22%
3-year money is down 0.10% at 1.33%
5-year money is down 0.18% at 1.73%
My first reaction when I saw Aldermore had launched a 100% product was one of nervous optimism.
While it is great to see a product requiring no deposit, I could just picture the headlines in the newspapers suggesting we were going back to the mad bad old days.
Aldermore’s product is a three-year fixed rate at 6.48% with borrowing over 75% LTV secured on a parent or grandparent’s home.
A large number of first-time buyers getting on the ladder benefit from parental help but not many parents have large sums of money lying around. But I would imagine the number of parents who have equity in their properties is higher.
The rate is high but since there are no competitor products you would not expect Aldermore to price it cheaply. Even at 6.48% it will allow some borrowers to buy a house for the same or maybe even less than they are paying in rent.
This product is another sign of innovation by smaller non-bank lenders that seem more agile and nimble. They cannot usually compete on price so they astutely spot product gaps and create something to meet the need.
It is good to see more brokers now have access to Saffron Building Society’s innovative 95% LTV first-time buyer product via Brightstar Financial, Mortgage Talk and Complete Mortgage & Loan Services. And even better, the rate has come down from 6.49% to 5.79%.
The deal is fixed until the end of March 2015 with a 2% fee. The product has a sensible way of underwriting the affordability of the loan it uses the borrower’s last 12 months’ rental payments.
Despite Moneyfacts.co.uk suggesting average residential fees seem to be going through the roof, I don’t think they are. If it said that buy-to-let fees were getting higher I would have agreed.
No matter how high the fees are on residential deals, most lenders offer a range of rates and fees. wants to borrow £50,000 they can have a no-fee product. If they want to borrow £200,000 they have a medium-fee product and if they want £1m they pay a large fee but save massive amounts in interest each month.
Sadly, this does not seem to be the case with buy-to-let rates as the majority have percentage fees. Between the two largest lenders, BM Solutions and The Mortgage Works, there are 48 buy-to-let rates of which a mere eight have set fees and six have no fee.
But while some products don’t have percentage fees, across a range of fixed and trackers for periods of between one and five years there isn’t much choice.
Heroes & Villains
Hero of the week is Accord Mortgages with its excellent deals at great rates. Service is good and it now offers buy-to-let loans. Accord combines the scale of a large lender with the innovation and ambition of a smaller one.
Villain of the week is housing minister Grant Shapps. I am still waiting for him to do or say something useful. With rents rising, house prices shaky and continued difficulty for first-time buyers, it’s time for him to walk the walk, not just talk the talk.