Losing interest? Hopefully not, because I’ve only just begun… Imagine you’re a super-sleuth – who would you be? Hercule Poirot? Jack Clueso? The dynamic, go-get-‘em Miss Marple? Perhaps some of you would even choose Professor Robert Langdon.
If you fancy yourself as a bit of a detective, look at the products at the bottom of the page and crack the code.
Product A
5 per cent fixed for 25 years.
95 per cent loan-to-value.
Mortgage term of 25 years.
Capital and interest.
Product B
5 per cent fixed for 25 years.
95 per cent loan-to-value.
Mortgage term of 25 years.
Capital and interest.
Both products have identical reversionary rates and set-up charges
It’s a bit like ‘spot-the-difference’ without the dodgy drawings. Look again. The fact is, on the face of it, nothing is different. But what if I was to tell you that product B costs £10 more a month if the loan was £150k and £18 more for £250k – or put another way, an extra three-and-a-half month’s payments over its lifetime? Now you can see why lender business-to-business adverts can be so misleading to a point that would impress even Fagan. I’m sure no malice is intended, but I can’t help thinking something’s not quite right. Yes, lenders are commercial organisations so they’re bound to interpret the rules to suit their objectives, but shouldn’t the Financial Services Authority (FSA) be more rigid?
Where are you going with this one Stokesy, I hear you cry? Well, when it comes to sleuthing I’ll admit I’m more Hong Kong Phooey than his wiser side-kick, Spot (the ironically titled ‘striped tabby’). But those who are smarter than the average bear may have deciphered this already. I refer to the code that is ‘interest calculation or rest period’ – specifically, the differences between calculating interest daily on a capital repayment mortgage or annually.
On top of this, for ‘system’s convenience’, some lenders have decided that there are, in fact, 31 days in every month, while others calculate the interest in ‘advance’ rather than in ‘arrears’ – fundamentally illegitimate ways of screwing the public. Forget the topical hoo-hah surrounding exit fees, (which are at least comparable for the average punter), this is blatant undercover work, increasingly important for those who wish to overpay. Applicants must strategically plan to coincide their excess payments on an annual rest anniversary date and invest their money in the interim, otherwise the overpayment could lie dormant in the lender’s pocket for up to 11 months.
It goes without saying that if a lender is offering ‘daily charging’, it will (and often does) feature prominently in the business-to-business advert, particularly in the all-important ‘flexible arena’. If not, it will be as elusive as water in the Sahara. Just as the fictional super-criminal Moriarty himself was foiled by Holmes by leaving crucial clues in the most obvious place (a bookshelf), I strongly believe that when checking data, the ‘hidden’ facts are the ones that are hard to spot.
To conclude, it would be impractical to ask lenders to change their back-office systems, however the FSA could enforce a rule to make this information more prominent on advertising.
Mainstream
With fixed rates practically gone, I will turn my attention to the variable based market. Dunfermline BS has a 4.20 per cent two-year discounted rate to 95 per cent LTV. Lambeth and Woolwich have two-year tracker discounts at 4.25 per cent and 4.38 per cent respectively, at low LTVs. The Woolwich product includes a fee-assisted remortgage package.
Northern Rock has simplified its procedures for guarantor mortgages placing more onus on the legal work rather than front-end form filling and interviews.
GMAC-RFC has further relaxed its property criteria, routinely accepting flats up to 10 storeys.
Prime self cert
TMB is continuing its excellent 4.79 per cent fixed for two or three-years via selected outlets including Mortgage Times – despite swap rate rises.
Capital Home Loan’s 5.24 per cent two-year tracker to 90 per cent LTV.
GMAC-RFC is alone again at 95 per cent, since Amber Homeloan’s fixed rates have been pulled.
Prime buy-to-let
Most lenders have enjoyed the day one income provided by 1.50 per cent completion fees, and now that their fixes have been pulled, are replicating a similar policy (many for the first time) on their trackers as well. The interesting thing to note is whether they also choose to open their rental calculations to trackers, as many have historically restricted this to the certainty of fixed rates.
Mortgage Trust is poised to be more aggressive on its limited company products, which, unlike MT Select range, are available to the mass market.
BM Solutions has a 4.69 per cent two-year tracker with valuation refund and free legals.
Adverse
Most lenders have successfully maintained their fixed rates to date because of the extra margin built-in, particularly in niche areas, for example, right-to-buys. They also generally want to limit product issues to avoid complications and coincide with LIBOR reset dates.
Mortgages plc however has re-priced its 90 and 95 two-year fixed bands, presumably as it can now afford to be more selective with business levels rising. It originally increased these bands to coincide with its ‘On-Demand’ online launch earlier in the year. To avoid detection and compete with Platform, it has launched two year fixes with 1.50 per cent completion fees.
SALT has clarified its arrears policy, which is favourable for those who miss payments now-and-again but never miss two consecutively.
