In a period of exceptionally low interest rates, which makes pay rates more affordable, the enhanced income multiples will allow more people to access the housing market and make a first step on the housing ladder. This can be done with the security of knowing that payments cannot increase until 2008, whatever may happen to interest rates and that there is the comfort of no early repayment tail.
Peter Stimson, Head of Product Development at GMAC Residential Funding, said: “Our new 5 year fixed rate enables somebody earning £25,000 a year to borrow £125,000, instead of the industry traditional £75,000, making all the difference towards securing the property of their dreams. The 5 year duration will also allow clients to budget ahead and, with no redemption overhang, they can review their options at the end of the fixed period”.
The lender has also introduced a full term tracker for the buy-to-let sector, also with an improved pay rate affordability calculation. As Stimson explained: “Most buy-to-let mortgage products offer a short term fixed rate or discount, which revert to the lender’s discretionary Standard Variable Rate (SVR) thereafter. Therefore, the SVR is typically used by lenders to arrive at the mortgage payment affordability calculation. As GMAC Residential Funding’s new product tracks Bank Base Rate for the life of the loan, the SVR is irrelevant.”