MortgagesFeb 19 2015

TSB targets 5% deposit holders with 10-year deal

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TSB has launched the only 10-year fixed-rate mortgage in the market for borrowers with only a 5 per cent deposit, among a flurry of loans at 95 per cent LTV.

The 10-year loan is fixed at 5.69 per cent with no product fee to pay.

Two- and five-year mortgages at 4.99 per cent and 5.69 per cent respectively are also being made available to customers at 95 per cent LTV.

Although no arrangement fee is charged, consumers will have to pay a small interest-free fee to cover the setting up, routine maintenance and closing down of the mortgage.

All offerings are part of TSB’s Fix and Flex policy which allows customers to leave after five years without having to pay an early repayment charge.

Initially, the mortgages will be made available to customers applying directly to TSB either in branch or over the telephone, but the range is due to be offered through TSB Intermediary, launched in mid-January, later in the year.

Mortgages available through TSB Intermediary will mirror those on offer in TSB branches.

Provider view

Ian Ramsden, head of mortgages at TSB, said: “TSB was born to bring competition to the market, and we are committed to offering our mortgage customers competitive products to help them realise their home ownership plans.

“We are the only mortgage lender to currently offer mortgagees up to 95 per cent with a 10-year fixed rate. Helping people to get a foot onto the property ladder is a fundamental part of creating thriving local economies, and people thriving all over Britain is what TSB’s local banking for Britain is all about.”

Adviser view

David Hollingworth, associate director at London & Country Mortgages, based in Bath, said: “Ten years fixed-rate is a product that has been popular in recent weeks. More lenders will be looking to launch this product.

“I think the fact that TSB allows customers to leave the agreement after five years without having to pay an early repayable charge is great for borrowers, as most lenders would tie you to the full 10 years.

“The only thing I would say is that people with smaller deposits, like first-time buyers, might improve their LTV situation sooner than they think but will be unable to take advantage of the lower rates offered to those with a bigger deposit.”

Charges:

No product fee. Interest-free charge of £265 to cover the set-up, routine maintenance and closing down of the mortgage is applicable.

Verdict

Long-term mortgages are in fashion with lenders launching or making reductions to their existing 10-year offerings in a bid to bolster their clientele. A rise in interest rates is pending, but the Bank of England shows no signs of raising base rates this year as many predicted. Instead, there have even been suggestions that it could fall even lower to 0.25 per cent to prevent deflation.

Customers could be attracted to TSB latest offering by the absence of a product fee and the bank’s Fix and Flex agreement, allowing customers to bail after five years.

A borrower’s financial situation can change drastically in a short period of time. Therefore, while a long-term fixed-rate loan might suit a borrower’s needs in the immediate future, it could close the door to opportunities of securing a lower rate in the future.