Teachers Building Society has launched a new fee-free 1.79 per cent two-year fixed rate remortgage product exclusively for intermediaries.
It has been launched in response to the Bank of England putting up interest rates to 0.50 per cent from 0.25 per cent. The company said the offering will appeal to borrowers who are nervous about the effect of higher rates and further increases.
This mortgage is available at up to 80 per cent loan to value (LTV) and comes with no arrangement, application or valuation fee.
After the two-year fixed period ends, the rate changes over to the standard variable rate, which is currently 4.74 per cent and remains on Teachers Building Society's variable rate terms for the rest of the mortgage. The overall cost of comparison is 4.3 per cent (annual percentage rate or change), while an early repayment charge of 3 per cent will be applied for the duration of the product term.
Borrowers can overpay by up to 10 per cent of the loan outstanding each calendar year without charge.
Remortgaging helped to boost the property market in September amid a decline in overall lending, according to UK Finance. Many have taken the rate rise to mean further increases might occur in the near future, opting to remortage on fixed-rate deals.
The non-seasonally adjusted data shows the number of loans to remortgaging homeowners was up 13.2 per cent year-on-year during the month to 35,900, while buy-to-let remortgaging climbed 6.1 per cent to 12,200. Anticipating the rise in interest rates in November, the number of people remortgaging on five-year fixes broke a new record in September.
Research from conveyancing service provider LMS also showed that two-fifths (42 per cent) of remortgagers opted for a five-year fixed deal in September.
The percentage of remortgagers fixing for five years has now grown for seven consecutive months. Remortgaging is now more affordable than ever before, with annual repayments falling to 16.4 per cent of total income – a historic low, the firm said.
Provider view
Andy Yates, business development manager at Teachers Building Society, said: “Given the recent movement in the Bank of England base rate, people will be looking for the stability of a fixed rate and this new exclusive, coupled with our tailored lending criteria, bespoke underwriting and ability to lend up to five times joint income – subject to affordability – should make it an attractive option.”
Adviser view
Kevin Dunn, senior partner at Furnley House, said: “This is a competitive product with a unique lender. However, there are other similarly competitive deals in the marketplace.
“Since the Bank of England raised the base rate slightly, there have been a number of lenders who have taken the opportunity to lower their rates on certain products.
“Annually, around this time of the year, we see some lenders lowering rates to try to give a boost to their annual lending figures. I would say this trend is continuing.”
Charges
Fee free.
Verdict
Lenders' response to the rate rise has been mixed. Some increased rates ahead of the news, while other chose to do the opposite. Some did both, hoping a decrease in mortgage rates post-BoE action would be savvy marketing, but have a neutral effect. Although bringing down its rates will make Teachers Building Society more competitive, it is unlikely that the offering will stand out in a big way from the rest of the crowd.
