Looking at the figures its clear that BM Solutions’ deals are more than hype

From Jonathan Cornell

I was interested to read the recent letter from Eddie Royce (Mortgage Strategy October 17) in which he claims only clients borrowing in excess of 250,000 would benefit from BM Solutions’ latest products.

I’m not sure where he got his figures from. While nobody would dispute the fact that the fees are high, I don’t think his criticism is justified. While adding back the fee into the pay rate is a simple way of comparing like for like products, there is no substitute for using a calculator, pen and paper- or preferably a spreadsheet. I will compare the BM Solutions rates with the Nationwide deals he feels offer better value. I will base these on interest-only loans as the figures are easier to explain.

If we look at clients taking out a two-year fixed rate the BM Solutions rate is 3.89% with a 1,499 fee compared with Nationwide’s 4.39% which comes with a reservation fee of 389. The BM Solutions product is 0.5% cheaper per year but the fee is obviously 1,110 more expensive. If you divide the fee difference by the interest rate difference it shows that a client needs to borrow 111,000 or more to be better off with the BM Solutions rate. I will admit that on a 100,000 loan Nationwide’s product is cheaper but this figure is a lot less than the 250,000 Eddie mentions.

But if you compare two-year tracker rates the BM Solutions rate is 3.75% compared with Nationwide’s 4.49%. Both products come with the same fees mentioned above and the results are even more surprising. As before the fee difference is 1,110 but this time the rate is 0.74% less per year. So over two years a client needs to borrow more than 75,000 to be better off with the BM Solutions product. That’s less than one-third of the 250,000 he mentions. As he said, he uses Trigold to calculate which deal offers his clients the best value over the scheme period so I used Trigold to check my maths and got the same results comparing the amount paid over the two years and then adding the arrangement fee.

According to August 2005 figures from the British Bankers Association the average mortgage approval for house purchase was 130,500. So even someone borrowing less than the average amount for a house purchase would be better off financially with both of the BM Solutions rates compared with the Nationwide rates.

I will admit my figures do not take into account other fees such as the amounts charged for surveys, telegraphic transfer fees, costs for not taking the lender’s insurance, the end dates of the products and the ability to repay lump sums. I have also not compared the BM Solutions rates with the current best buy products but I will stand by the comments I made in my column a few weeks ago in which I described the BM Solutions rates as a ‘money sale’. I think for the average client the BM Solutions deals are fantastic value, irrespective of the company’s marketing budget.