There are no penalties for early repayment or other hidden charges. The deal, which is on Abbey’s Flexible Plus mortgage, is available to both new and existing customers. The move is part of Abbey’s latest efforts to make it simpler and easier to choose the right mortgage, which also includes the introduction of new pick-‘n-mix options. In addition, it is taking a first step towards delivering on its promise to reward loyal mortgage customers in a fair and consistent way.
Low rate for life
By paying an upfront fee of £1,000, customers will pay just 0.50% above the Bank of England base rate1, which is guaranteed for the life of the mortgage. The rate is currently 4.25% compared with Abbey’s current standard variable rate of 5.75%, which means a customer could save over £26,000 over the life of their mortgage.
From 17 December, advisers and their clients will be able to tailor their basic choice of mortgage with `add-ons’ from a pick 'n' mix list - building a mortgage that really meets their needs. The options are clearly priced so customers can see exactly what they are paying for and what impact it has on their mortgage interest rate – either increasing or decreasing it.
Step 1: Intermediary recommends the mortgage most appropriate to the customer’s needs from the Abbey range.
Step 2: The amount of the deposit determines the initial mortgage interest rate the customer will pay.
Step 3: Intermediary and customer discuss and agree any additional options from the pick 'n' mix list.
Among the options that can be added are:
- 'Guaranteed deal for life' - pay an upfront fee of £1,000 to guarantee the mortgage rate will remain 0.50% above the Bank of England base rate for the life of the mortgage1.
- 'Help with fees' - Abbey pays for a valuation and provides £250 cashback.
- 'Pay now and save ' - Customers can pay an upfront fee to obtain an even lower mortgage interest rate during the special offer period.
First time buyer with a 10% deposit:
2 year tracker rate3 3.94%
- Include valuation and cash back - mortgage rate increases by 0.25%
Total mortgage rate payable: 4.19%
New customer moving home with a 10% deposit:4
Flexible Plus mortgage rate 4.50%
- Guaranteed deal for life (upfront fee of £1,000) rate decreases by 0.25%
Total mortgage rate payable: 4.25%
Loyal mover discount
Abbey is committed to finding a way to reward loyal customers in a fair and clear way. As a first step, it is introducing a small loyalty discount on two of its most popular mortgage ranges.
From 17 December 2003, existing Abbey mortgage customers moving home who choose:
- a two-year variable rate tracker mortgage or two-year fixed rate;
- and opt to add on 'help with fees', giving them a free valuation and £250 cashback will pay just 0.20% extra on their rate rather than the normal 0.25%, a discount of 0.05%.
Existing Abbey mortgage customer moving home, with a 25% deposit:
Two year fixed rate mortgage rate 5.09%
- Include valuation and cash back - rate increases by 0.25%
- Existing customer loyalty bonus reduces the rate by 0.05%
Total mortgage rate payable: 5.29%
Early next year, Abbey will announce more new options for loyal mortgage customers. Further details will be available in the Spring.
Ambrose McGinn, Director of Abbey for Intermediaries, said: “With the introduction of clearly priced “add-ons” for our mortgages, intermediaries will be able to advise and help their clients create the best possible mortgage for their needs.
“Finding a way to reward existing customers, while at the same time, making upfront deals attractive to new customers, has challenged mortgage lenders for years. None of the solutions has really worked, often just causing problems.
“We think the changes we are making represent a genuinely new approach to making Abbey mortgages simple to understand and rewarding to keep. There is still a lot so work to do but we are committed to improving things for intermediaries and our customers.”