On Monday 15 November the direct bank will introduce its lowest ever 2 year fixed rate mortgage with a £999 fee in response to requests from customers with larger mortgage balances.
The choice between low fee/higher rate and higher fee/low rate depends on the size of the mortgage. Below is an example using first direct's new, lowest ever, 65% 2yr Fixed Repayment mortgage with a £999 fee and 2.69% rate versus first direct's 65% 2yr Fixed Repayment mortgage with a £99 fee and 2.99% rate.
A remortgage customer looking to borrow £100,000 would be better off opting for the 2.99% rate/£99 fee as this would lead to a £529 saving over the 2 year fixed rate term. On the contrary, a customer looking to borrow £300,000 would be better off selecting the 2.69% rate/£999 fee and save £212 over the 2 year term.
first direct has found that the widespread financial uncertainty among borrowers in the first half of the year bred indecision in the remortgage market. Customers were reluctant to make any financial decisions fearing they may not have all the facts and that they may 'get it wrong'.
The Coalition Government's recent announcements and the growing economy have brought greater clarity to the state of the financial market and consumers now believe they know where they stand, making them feel more confident to make informed financial decisions.
The canny homeowner has realised that tracker interest rates are unlikely to fall further and that fixed rates are also close to the bottom of the cycle so now is the right time to remortgage; first direct has seen a 25% rise week on week in bookings of its 5yr fixed 3.89% rate.
Richard Tolchard, Senior Mortgage Product Manager at first direct commented:
"As one of the fastest growing lenders in recent years, first direct continues to be there for homeowners when it counts - when times are difficult and many homeowners budgets are squeezed.
"Earlier this year we succeeded in understanding the needs of customers by introducing the £99 fee giving people the certainty that they would be quickly better off by switching from their standard variable rate (SVR), which in turn woke up the remortgage market.
"Since the Government's decision on spending, we've found that those people with a larger mortgage who would rather pay a higher fee to receive a lower rate are now ready to remortgage too, so we've added new products to our range to suit their circumstances."
