90% LTV First Time Buyer 5 year fixed rate mortgage launched by the Coventry Building Society
The Coventry Building Society have stepped into the 90% first time buyer mortgage market with a very innovative penalty free 5 year fixed rate offered at 5.99%.
As an independent mortgage advisor, we have been extremely concerned at the lack of longer term fixed rates available at higher loan to values and feel that high street lenders are sucking in unsuspecting borrowers on a non-advised basis onto short term 2 year deals.
The first time buyer thinks that it’s great that they have been agreed a mortgage with just 10% deposit but what happens in 2 years time when the fixed rate has ended and there is insufficient equity within the property to enable a remortgage to a more competitive product? They are stuck on the lender’s standard variable rate or an uncompetitive retention product offered by the same lender.
The benefit of using an independent advisor that offers a ‘full advice and recommendation’ service is that an applicants circumstances are considered both now and in the future to assess the most appropriate product for their circumstances. The maximum remortgage loan to value is currently 85% as lenders are still cautious post credit crunch. This lending criteria hasn’t been improved for some time and lenders don’t appear to be in a hurry to increase the maximum loan to value available on remortgage. This is an important consideration for the future especially in the current housing market where house prices are tipped to stagnate or have minimal growth in line with inflation as on a capital & interest repayment mortgage, it is likely to be at least 3 years (assuming minimum contractual payment and no increase in house prices) before you have paid off sufficient to create 5% equity within the property to allow a remortgage.
A first time buyer on a limited budget and not used to paying a mortgage often likes the piece of mind associated with a fixed rate and in the current economic climate, the longer this is offered over the better. At the time of writing this article, there are some more ‘competitive’ 3 year fixed rates available at 5.49% & a 5 year fix at 5.69% but these have early repayment penalties within the fixe rate period and we feel the Coventry scheme not only offers long term piece of mind against rising interest rates but has the ‘get out of jail free card’ of no early repayment penalties so that once there is sufficient equity within the property and a much better deal becomes available then you are free to remortgage elsewhere as oppose to having to wait until the end of the fixed rate. A lot can happen within a 5 year period and this product will allow you to move or redeem without penalty should your circumstances change.
If you would like any further information on this product or would like to discuss your requirements with an independent mortgage advisor the contact Mosaic Mortgages for a review of your circumstances and to see whether you are eligible for this particular first time buyer mortgage.