The advance of the flexible mortgage has shaken up the UK mortgage market. Yorkshire Bank is t...
The advance of the flexible mortgage has shaken up the UK mortgage market.
Yorkshire Bank is the latest lender to disregard reports all-in-one facility mortgages are too complicated for the average homeowner.
Instead the bank has acted upon recent research it undertook which concluded over 50 percent of people would chose an all-in-one mortgage facility if it was offered.
This week the bank will launch a new Flexible Repay interest-only "line of credit" that combines all of a homeowner's lifetime banking requirements in just one account.
Yorkshire Bank's personal financial services general manager, Paul Fegan, says research shows 62% of homeowners now view a 25-year mortgage commitment, with rigid monthly payments, as totally inappropriate for their financially complicated lifestyles.
"In future people will not just chase the lowest headline rate; they will look for a lender that provides the best combination of facilities in one product and the best overall value," says Fegan.
Under Flexible Repay homeowners can make the most of the facility as a tax-free haven for savings and as an instant-access "line of credit" (with no approval needed) for borrowing for cars, holidays or to invest in the stock market.
This is because being an interest-only mortgage, provided homeowners cover all debit interest accrued, they can defer repayment of the capital until the end of the loan term.
In this case, they will need to ensure that a suitable investment plan is put in place so they are able to repay the capital at the end of the term.
Most homeowners' salaries are paid into a current account, and their mortgage payments are then debited from this account at a regular point during each month. With a traditional-interest only loan the balance is reduced on the expiry of the term so the outstanding balance is therefore constant at the original amount borrowed.
Flexible Repay account holders can control how quickly they pay off their home loan because "the line of credit" facility combines a current account and mortgage, and features daily interest calculation.
Home buying savers benefit with Flexible Repay because a single variable rate of interest is payable on the entire loan. By putting savings into Flexible Repay, the balance is reduced, which means a reduction in interest. The amount of interest saved is considerable more than the interest earned in any normal savings account and they can still access their funds instantly.
The interest rate on the Flexible Repay account is 6.74%. To qualify for a Flexible Repay mortgage, homebuyers must have an income of at least £25,000 per annum (£35,000 for a joint application). The minimum loan is £40,000 and the loan to value ratio is 80 percent.
Slow progress in improving diversity
Share purchase deal with assets of £28m
Came into effect in January
Three examples of compensation rule issues
Buying in baskets