Smart new mortgages for savvy borrowers!

A welcome return to product innovation means more mortgage choice for you

Lenders have been cutting rates throughout much of 2010, but how low can they go?

Not too much lower, in my opinion, but thankfully something else is happening.

Rather than just chopping rates, lenders are also being more innovative about product design and looking at how they can better serve certain markets.

In the last week alone a raft of mortgages have been launched that not only offer great rates, but also offer an added extra, be it a measure of flexibility, a reduced fee or a waiver of legal and valuation fees.

These added extras can make a real difference to borrowers. After all, the true cost of a mortgage should include everything -- your monthly repayments over a particular period, your arrangement and booking fee (or whatever else they call it!), and any applicable legal and valuation fees.

So, what's new this week? What’s so good about them? And where do they stand when placed in a table of similar products?

The Great Escape mortgage

Barclays Woolwich has launched a deal aimed squarely at existing borrowers who are considering remortgaging, but are not sure which way to go -- a fix or a tracker. The lender reckons there are a massive 700,000 borrowers currently sitting on their lender’s SVR so it’s a whopping target market.

What is it?

The Great Escape deal offers a low-rate term tracker that it costs you nothing to move onto, plus you are free to move onto one of the lender’s fixed rate deals at any point without incurring any Early Repayment Charges (ERCs).

What so good about it?

The rate is keen at 2.68% up to 70% loan-to-value (LTV) and even better the deal is fee-free. In addition, it comes with £300 cashback which will probably cover your exit fee from your existing lender (a fee most borrowers need to pay). And finally it comes with free legals and valuation fees, so it is truly a fee-free mortgage.

Another plus is the fact that you can move onto a Woolwich fixed rate without incurring ERCs.

What’s not so good?

While it’s great that Woolwich is now allowing existing borrowers to move onto one of its fixed rates ERC-free, this only tells half the story.

It’s actually pretty unusual for term trackers to charge any ERCs at all. Woolwich is one of the exceptions, and it still charges them if you want to remortgage elsewhere (1% of the outstanding balance for the first two years of your deal).

Actually if you get a term tracker with another lender you will probably be able to move to any deal with any lender at any point, ERC free.

This deal is also remortgage only, so not applicable to first-time buyers or home movers.

Finally, while the rate is great for a fee-free deal, there are cheaper term trackers, and not all have enormous fees, as the table below highlights. None of the other deals below carry any ERCs at all.

Top term trackers

Fee-free, five-year fixes

NatWest and Coventry Building Society have both launched five-year fixed rates in the last week. Five-year fixes are particularly popular right now because they are extremely well priced (the average five-year fixed rate is at its lowest ever level) and they offer great long-term security against inevitable rate rises.

What’s so good about them?

The rates are keen on both of these mortgages at 3.99% (NatWest) and 4.25% (Coventry BS) and Coventry’s deal is available up to a generous 75% LTV. NatWest’s mortgage is completely fee-free, and both deals also come with free valuation and legal fees for remortgagors.

What’s not so good?

These are both good deals but lower five-year fixed rates are available if you are willing to pay a bigger fee. Remember when you fix for five years your fee is spread over a long time, so you can perhaps afford to pay more to secure a lower rate.

As always you need to work out the true cost for your circumstances over the five-year period, including monthly repayments, arrangement and booking fee (if applicable) and valuation and legal fees (if applicable).

Also, the Coventry deal is billed as coming with no arrangement fee. This is technically true but the lender charges a £199 booking fee. This sneaky way of splitting the name of the fees is confusing because the deal clearly comes with an upfront fee of £199. That’s still very cheap, but it’s not free.

Below is a table of some of the best five-year fixed deals, including the two mortgages mentioned above in bold.

Fantastic five-year fixed rates

*Discount of 0.24% available if you take out the lender’s home insurance policy

Take a two-year fix

NatWest and Coventry BS have also both just launched two-year fixes this week. Both come with keen rates again, no arrangement fees, and between them the lenders cover off a few different LTV tiers, catering for borrowers with different deposits.

What’s so good about them?

It’s great that these two-year fixed rates don’t come with an application fee and both again come with free legals and valuations for remortgagors.

NatWest’s deal is a stonking fee-free rate of 2.75%, with £250 cashback, and Coventry’s mortgages are pretty keen at 3.05% (65%) and 3.15% (75%).

What’s not so good?

You need a staggering 50% equity to get the NatWest deal so it is clearly targeted at the lowest risk borrowers around. But if you have it, the rate is great.

And Coventry deals are, again, not technically fee-free. They come with no application fee but the £199 booking fee does apply.

Those who can afford to pay an even bigger fee can find cheaper rates, as the table below shows, although the NatWest deal does stand out here:

2-year fixed rates

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