Are headline-grabbers the best deals?

BM Solutions recently launched a batch of mainstream products starting at 3.75% in what was considered by some as a move to stave off negative publicity after the departure of key staff.

Though the headline rates grabbed the attention of brokers, the fee of 1,499 led some to comment that the deals would only be of use for larger applications.

Bank of Scotland also recently launched a large loans tracker product at base less 0.61% for two years, but with an even higher fee of 2,500 along with two years of extended early repayment charges.

So, Mortgage Strategy asks: What is your reaction to the deals recently launched by Bank of Scotland and BM Solutions and how do they compare with those that exist in the market?

Mike Fitzgerald, Brentchase Financial Services – I don’t like deals with extended penalties except on heavy adverse cases and I’m certainly not a fan of charging fees, particularly of a few thousand pounds. Huge fees on top seem to be taking the place of the indemnity insurance a lot of lenders have got rid of. Paying fees upfront is something that doesn’t seem fair either. While deals with such impressive headline rates will inevitably rise to the top of sourcing systems, when bearing the fees in mind the deals look less competitive.

Ray Boulger, John Charcol – With BM Solutions’ deals, brokers and clients face the question of whether it’s worth securing a lower rate by paying a higher fee. For larger mortgages this will represent better value. Lambeth has a two-year fix at 4.15% with interest calculated annually. It won’t suit all but is a strong deal.

Mike Carpenter, Diamiqe Financial Services – Before ascertaining whether either deal was right for my client, I would calculate the total cost of the mortgage over the length of the deal and compare it with other products. BM Solutions’ deal looks impressive for larger loans but for smaller cases you would have to evaluate cost-effectiveness. You can’t select a product on headline rate alone.

Mike Fry, Halton Insurance Services – These products are rather silly. Presumably they think customers will be sucked in by the headline rates but any professional broker will explain the costs behind the scenes such as the arrangement fees.