Accord Mortgages has launched seven two-year discounted standard variable rate (SVR) mortgages that it says significantly undercut market average two-year fixed rates by as much as 0.81 of a percentage point.
The new range from the intermediary-only lender, provides options for borrowers with differing budgets, from a 5 per cent to a 40 per cent deposit, and tracks the lender’s SVR, currently at 4.99 per cent.
For example, a borrower with a 10 per cent deposit could choose Accord’s 1.64 per cent two-year discounted SVR mortgage, which is 0.81 of a percentage point below the 2017 market average rate for a two-year fixed deal at the same loan-to-value (LTV).
Additionally, Accord said borrowers looking for a 75 per cent LTV mortgage could make a saving by choosing the lender’s 1.29 per cent discounted SVR, compared to the 2017 market average of 1.54 per cent for a two-year fix with an equivalent deposit.
The two-year range comes with a £495 product fee and free standard valuation, with the exception of a 0.97 per cent option at 60 per cent LTV which has a £1,495 fee and no additional features.
The range is available to both house purchase and remortgage customers, apart from the 2.99 per cent mortgage at 95 per cent LTV, which is aimed at purchase customers only.
The lender said the mortgages are designed to give borrowers flexibility as they can redeem their mortgage at any time during the discounted period and will only incur a 1 per cent early repayment charge (ERC), which is lower than that of Accord’s typical fixed rate ERCs.
Provider view:
Ben Merritt, mortgage manager at Accord Mortgages, said: “Discounted standard variable rate mortgages may be a good option for borrowers who want to benefit from lower monthly repayments given the rates are similar to that of fixed rate deals.
“While the rate on these types of mortgages can go up as well as down, with our highly competitive range customers could potentially withstand a number of rate increases before their rate becomes higher than the market average, which could mean customers pay less even if rates do go above that of a fixed rate offering.
“Borrowers on discounted SVR mortgages can come out of their deal at any time, with lower costs than their fixed rate equivalents, which gives them options to move their mortgage if rates do rise.
“It’s important that brokers reinforce the variable rate message to help their customers factor it into their budget but nonetheless we’re sure our new mortgages will appeal to borrowers looking for flexibility and competitive monthly repayments over a short period.”
Adviser view:
Michelle Lawson, personal mortgage and protection adviser at Lawson Financial, said: “I don’t have much call for SVR related products due to the uncertainty surrounding the rates and them generally not being linked to other external indexes.
“It is innovative and great thinking but, in my opinion, with the constant reminders of potential rate rises I’m not sure they will get a significant take-up on these products.”
Charges:
Product fees are £495 or £1,495 depending on option chosen.
Verdict:
At a time when rate rises are being anticipated and the uncertainty of Brexit continues to loom over the country's financial services it may be a struggle to attract a large number of borrowers or advisers.
ima.jacksonobot@ft.com
