Borrowers need to weigh up the overall cost of the product, brokers say
Skipton Building Society has introduced a new range of low rate two-year fixes aimed at helping existing borrowers with payment difficulties.
The mutual said the move complemented the support it already provided borrowers through the Mortgage Charter, such as repayment schedule adjustments and mortgage term extensions.
The new range has a fee of 5% of the existing loan amount, with rates available from 3.35% at 60% loan-to-value (LTV), 3.39% at 75% LTV, 3.49% at 85% LTV, and 3.59% at 90% LTV.
“Its crucial lenders offer as much support as we can to ensure borrowers remain secure in their own homes through these turbulent times, by looking at further opportunities to provide certainty and confidence in the ability to maintain payments,” said Charlotte Harrison (pictured), chief executive of home finance at Skipton Building Society.
“Signing the mortgage charter was just one step in us providing support, but we feel we can do more for our borrowers. It’s important we think differently, on what further support could be to make a real difference for our members who may be facing a future of financial difficulty due to the limited options on the market available to them.
“Our borrowers have benefitted from strong growth in house prices over the last couple of years, earning them additional equity in their properties. For those who are financially stretched, this is a good time to consider if they can make that equity work for them.”
However, some brokers – sought for comments by news agency Newspage – questioned whether the fee was justifiable and urged borrowers to seek advice.
“Is it really 3.35%?” asked Rhys Schofield, brand director at Peak Mortgages and Protection. “With a 5% fee, in essence, clients are actually paying 5.85% and may well be better off taking a ‘higher rate’ with less fees. It probably has its place, but whether it’s a good idea or not is definitely something to talk to an adviser about.”
Stephen Perkins, managing director at Yellow Brick Mortgages, called the move by Skipton “very innovative” as it effectively allowed their existing clients to capitalise some of their interest in exchange for lower monthly payments, which would also increase their client retention and reduce risk of arrears.
“However, borrowers need to weigh up the overall cost of the product against their personal priorities,” he reminded.
Elliott Culley, director at Switch Mortgage Finance, echoed Perkins’ sentiment, saying that while the low rate was eye-catching, the 5% product fee was high and any customer looking at the deal should consider the overall cost, not just the rate.
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