John Charcol launches large loan 2 year tracker mortgages

John Charcol has launched an exclusive range of large loan 2 year tracker mortgages giving clients the option to trade off the interest rate and the fee. The cheapest rate available is Bank rate - 0.01%, giving a current pay rate of 4.99%, and this deal carries a 2.75% arrangement fee. Borrowers who don't need such a low rate can pay Bank Rate + 0.74%, current rate 5.74%, for a fee of 1.25%. Both of these deals are available for mortgages between £500,000 and £5,000,000 up to a maximum loan to value (LTV) of 65%.

Ray Boulger of John Charcol comments: "Many borrowers will be coming off 5 year fixed rates of less than 4% in the next few months, and many others will be coming to the end of 2 or 3 year fixed or tracker mortgages with rates well under 5%. Switching to a new large loan fixed rate without paying a big fee will mean paying a rate close to 7%. Even switching to a new tracker without paying a big fee will mean paying well over 6%. These two deals are designed to accommodate borrowers who can not easily afford to pay (or can but don't want to) the much higher rates which would be necessary without a big fee being used to subsidise the rate. They are available to those who want to borrow over £500,000 but particularly good value for those who need over £1million."

Both mortgages are available for purchase and remortgage and the fee can be added to the loan. There are no early repayment charges (ERCs) and so if borrowers can afford to make overpayments they can pay off all or part of the fee, or even more, whenever it is convenient. Likewise, if they wish to switch to another mortgage, perhaps a fixed rate if rates fall far enough, they can do so at any time without incurring an early repayment charge. Underwriting will be flexible, which is particularly important for high net worth clients who may have multiple sources of income.

For borrowers wanting a higher LTV John Charcol can offer up to 75% LTV with a slightly higher rate of Bank Rate + 0.84% (current pay rate = 5.84%) and a 1.25% fee. The best way to assess how competitive these deals are is to compare their effective rate with this same rate on other mortgages with a lower fee. The effective rate is calculated by pricing the fee into the rate. If the fee is a percentage the effective rate is the same regardless of loan size, whereas with a flat rate fee the size of the mortgage will affect the effective rate.

Boulger continues: "This table demonstrates that a large fee isn't necessarily bad news for borrowers. Providing the mortgage has a competitive effective rate the beauty of a low pay rate subsidised by a big fee is that it gives borrowers more control, especially when there are no ERCs. With a reduced monthly commitment, arrears and the resulting bad credit history are less likely, but borrowers still have the freedom to overpay as much as they wish. Borrowers with a volatile income could pay the basic amount some months and extra when they are flush. Others who are comfortable paying, say 4.99%, may prefer not to reduce their payment if bank rate falls and thus start to eat into paying off their mortgage in that way.