By Rachel Williams
The Commonwealth Bank of Australia is entering the UK mortgage market with a range of fully flexible mortgage deals.
The range of 11 products will be launched at the end of November and will feature a combination of discounted, fixed- and capped-rate deals. It will also offer buy-to-let loans.
Commenting on the launch Adrian Cosenza, head of European banking at the Commonwealth Bank of Australia, said: “We believe we have an excellent opportunity to give customers a better deal and have been doing this for many years in Australia.
“We noted similar developments in the UK market to those that occurred in Australia five years ago. That is, a situation where flexible mortgages had been around for a few years but were yet to take off. In Australia they are now the norm. One hundred per cent of mortgages are flexible in Australia. This compares with 7% of outstanding mortgages in the UK, but this figure is growing fast.”
The range is to be marketed under the NewWorld brand and the lender is currently accepting registrations from intermediaries interested in the range. Products will also be available via a call-centre and on the internet.
In addition to the standard flexible features such as overpayments and payment holidays that are now common to UK flexible mortgages, the range will include a number of more innovative Australian features.
Cosenza said: “We are intending to use our unique experience, built up in one of the world’s most developed flexible mortgage markets, to help make flexible loans a ‘must have’ rather than a ‘nice if’ for home owners in the UK.”
The Australian features will include loan portability, product switching and fortnightly and weekly payment options.
The ability to make payments on a more regular basis can save borrowers thousands of pounds over the term of the mortgage, according to Cosenza. He said: “Take an £80,000 mortgage – if that is being repaid at 6.99% over 25 years the minimum monthly payment would be £565. If payments were made fortnightly instead, the payments would be £283 and the loan would be repaid in 20 years and six months instead of 25 years, saving the borrower £18,000 in interest.”
He added: “We also allow borrowers to switch between product offerings. For example, a borrower may want to transfer to a fixed-rate product if their attitude to interest rates changes.”
The range will launch with a standard variable rate of 6.99% for owner-occupiers with a discount of 1.24% for six months. For a limited period owner-occupiers will also be offered one year’s free mortgage payment protection insurance, creating a saving of £300 on the average loan. Unlike most UK lenders, buy-to-let borrowers will be offered the same SVR as owner-occupiers.
The Commonwealth Bank of Australia currently has 1,075,000 loan clients in Australia, where it has a 25% share of the mortgage market.