US LIBOR closely follows US interest rates. These rates have traditionally been lower then those in the UK. The mortgage transactions are carried out in Sterling protecting customers from currency risks.
The product will be priced at US LIBOR plus 1.99 per cent and has a minimum term of five years and a maximum of 25. There are early repayment charges ranging from 8 to 5 per cent.
Linda Will, managing director of Accord, said the product was aimed at attracting clients and brokers who would not normally be interested in alternative mortgages. She said: “Traditionally those who use US LIBOR products are seen as financially astute, with a better understanding of how international markets work. But we believe this product can be successfully marketed to both consumers and brokers who would not usually consider them.”
Jennifer Holloway, head of corporate communications at Skipton Building Society, agreed. She said: “People are very often led by rates which are usually lower on US LIBOR products. We initially expected to sell our US LIBOR products to financially-savvy borrowers but found they had a much wider appeal.”
However Kevin Paterson, director of Park Row Group, expresses reservations over the product. “I think it is risky to link your mortgage to overseas interest rates, especially when you don’t really know what is happening on the ground,” he said. “These products are gimmicky.”
More information on the product can be accessed at www.accordmortgages.com.
