Brokers are being urged to take a ‘buy now while stocks last’ approach by Standard Life Bank to take advantage of its ground-breaking 25-year capped mortgage.
The loan, Futureperfect, which has a rate guaranteed never to exceed 6.25%, is available in limited tranches. Broker interest is likely to be such that the bank has warned that the current funding line drawn from Standard Life’s annuity fund will quickly be exhausted. A spokesperson said: “We believe this particular tranche will be out there for weeks rather than months.”
Alan Dring, national sales manager at the bank, added: “The scheme has limited funding, which comes via the SLA annuity fund. This is a widely used concept in the US in terms of long-term fixes. Within the annuity fund the opportunity is there due to gilt yields and gilt curves.”
Dring added that most lenders do not have access to such funding lines, so only a few life offices would be in a position to launch competing products.
“This concept could only be emulated by about four other providers,” he said. These include the likes of Clerical Medical, Scottish Amicable and Scottish Widows.
The loan has a variable rate based on the average SVRs of Halifax, Abbey National, C&G and Standard Life Bank, which will kick in should rates fall below the 6.25% cap. Lending is based on ability to pay rather than income multiples, although there is a maximum loan of £350,000. The maximum LTV is 90% and maximum age at entry is 42.
It is available on a capital and interest repayment method only and lump sum overpayments of £1,000 or more are permitted, although these will incur a redemption penalty if made during the first five years.
The charge is on a sliding scale of 10 months’ interest in the first year, to five months’ interest in year five. Interest is calculated daily.
Although overpayments are allowed, Dring emphasised that the loan is aimed at borrowers with a long-term view. He added that its long-term nature will provide intermediaries with a financial planning platform.
The loan provides £200 towards legal fees and the valuation fee is refunded on completion. It offers a procuration fee of 0.32-0.47 basis points to brokers depending on relationships and agreements.
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