The market may have cooled off over the past month or so, but this has not been all bad news for the mortgage intermediary. It seems that lenders have taken the opportunity afforded by this slight reprieve to revisit their product ranges and, as a result, several have developed and launched new products that truly break the mould.
Standard Life Bank, for example, seemingly untouched by the battles currently being fought out by its parent, has launched a product which puts many other deals to shame. Its 25-year capped mortgage offers a rate of 6.25% which is lower than almost every other cap on the market and is well below several market leading fixed rates. Despite its long term, it only imposes penalties for redemptions in the first five years. The product’s only downside appears to be that it will only be available in limited tranches and, as such, it would not be surprising if the initial line is exhausted before the broker has a chance to get on the phone.
The past month has also seen the launch of another two ‘firsts’ in the flexible market, with First Active introducing a fixed rate option on its current account mortgage and Mortgages Plc offering a flexible deal to the sub-prime sector.
On the subject of flexibility, the size of the current account mortgage sector is about to double. Joining First Active and Virgin in the current account ranks is the Woolwich, which launched the ‘Offset’ version of its Open Plan in June and is shortly to be followed by Intelligent Finance, the online all-in-one banking service from the Halifax.
These products which offset savings against borrowings have the potential to dramatically change the way lenders – particularly the high street clearing banks – treat their customers’ cash. It will not take long for customers to catch on to the fact that if they switch their finances to one of these state of the art accounts their savings will start working for them in a way they never have done before, potentially slicing years off their debt terms or providing them with lower or zero interest rates. It seems nonsensical, when you stop to think about it, that someone who owes £4,000 on their credit card suffers an interest rate of 23%, while the £4,000 in their current account is earning them virtually nothing.
Let us hope that more lenders jump on to this particular bandwagon – those that do not are sure to lose out in the long term as customers become increasingly fed up that their savings are doing nothing more than lining their bank’s pockets.
These accounts are also good news for intermediaries, not just because they pay commission, but also because they will require advice both in the selling and in the managing. No one is pretending they are simple to understand, so here is an opportunity for intermediaries to do what they do best – advise.