GMAC-RFC storms market with ‘MERC’ mortgage

GMAC-RFC has swept the competition aside with the launch of a new product offering non conforming criteria at a mainstream rate and featuring the UK’s first ever rate/redemption swap.

The ‘MERC’ mortgage stands for …

Mainstream rate
Extended criteria
Redemption swap
Creative solution

… explained thus:

Mainstream rate

The ‘MERC’ mortgage is priced at Bank Base Rate MINUS one basis point (0.01% bringing the MERC mortgage rate down to 5.24%) until 1 September 2010 at which point it reverts to Bank Base + 1.99%. This initial interest rate structure undercuts the terms offered by most high street lenders for mainstream mortgage products, yet is available on extended criteria.

Extended criteria

The ‘MERC’ mortgage embraces GMAC-RFC’s near prime and light adverse criteria as well as the ordinary mainstream terms. Thus, borrowers with up to £3000 of CCJs, or two months’ arrears in the last twelve, will be considered for this product alongside discharged bankrupts or settled IVA clients – all at the same mainstream rate of Bank Base rate MINUS 1bp.

Redemption swap

The ‘MERC’ mortgage features a rate/redemption swap never before launched in the UK mortgage market, giving borrowers security that, if rates rise, their cost to redeem reduces. For every 0.25% rise in Bank Base rate following completion of the mortgage, the early redemption charge will reduce by a like amount, and that reduction is then locked in forever. The redemption charge only applies to the initial 1 September 2010 period (i.e. no overhang), and an illustration appears in the editors’ notes.

Creative solution

The ‘MERC’ mortgage is a creative solution to the current problem where intermediaries would prefer to deal with an up to date, technology-led lender like GMAC-RFC whilst wishing to offer their clients the best possible interest rate. To make it easier to apply, there is no application fee to pay and free legals (or cashback in lieu) on remortgages. An added feature is that purchasers do not pay an application fee.

Commenting on the ‘MERC’ mortgage, Julie Gaskin, Corporate Relations Manager at GMAC-RFC said: “There is nothing in the market to compare with this product - a truly creative solution for intermediaries experiencing long delays with the new lenders, since our technology means that a full mortgage offer need only be 25 minutes away”.

Julie Gaskin added: “Although we have backed the ‘MERC’ product with substantial funding, it is a finite tranche, so only those applying early will benefit”.