The first thing that attracted me to a First Direct (a division of HSBC Bank plc) offset lifetime tracker mortgage was that it was listed at the top of the 'best buy' tables on moneysupermarket.com. A quick search revealed that it had also been voted the best lender for customer service in the Which? Money survey on mortgages 2008. This was the second year running that First Direct had come out on top. With a score of 90% first direct was 11% ahead of its nearest rival in the survey of 18 lenders. First Directs mortgages have won numerous awards over the years, the most recent being What Mortgage Magazine's winner of Best Direct Lender over 5 Years (February 2007).
In January 2009 their offset mortgage was one of the lowest rates on the market. Although I was not actually looking to remortgage at this stage because I still had nine months to run with my old mortgage the very attractive rate encouraged me to take a closer look at the product. I was at that time with the Alliance and Leicester and had two mortgage products with them due to remortgaging in the last couple of years to purchase an overseas property.
I was not particularly happy with the Alliance and Leicester. Despite the many falls in the Bank of England Base Rate the Alliance and Leicester mortgage products I held remained very high at over 5% - they did not pass on the cuts to customers! Due to the fact that house prices were fast falling, I felt that maybe it would be advantageous to look around now for a new mortgage. If I waited till September (when my redemption penalty would end) I feared that I would not be eligible
for a decent rate mortgage. To redeem my current mortgage was going to have a hefty £3000 penalty plus administration charge of £300.
If I was to stump up the early repayment penalty fees I desparately needed to find a product that was going to make the switch 'worthwhile'.
The First Direct offset Mortgage seemed to fit the bill. The offset base rate tracker 2.89% mortgage (1.89% above the base rate - 80%LTV) being offered by First Direct at that time seemed very attractive to me, despite the £799 product fee. Since then, due to cut in the Bank of England base rate, it was been reduced to just 2.39% making the interest repayments just under £400!
I did my calculations and worked out that if I switched to the first direct lifetime tracker offset mortgage my mortgage repayments (interest only) would be reduced to £400. My current repayments were £900. With the difference- £500 - I could make overpayments and bring it down to what it would have been in September had I stayed with the Alliance and Leicester. From October onwards I would be on a competitive rate with no penalty fees and the ability to make overpayments.
I decided to apply. I filled in the application form online and within minutes I was contacted by an agent from First Direct. He went through the form and the application process with me in some detail. I was very impressed with how he handled the process and he was very courteous and not at all a pushy type... I guess it took around 45 minutes to do but it was well worthwhile. Initially I was told that my and my husband's earnings were not quite sufficient enough to cover the cost of the mortgage required. However, I was quickly reassured and told that it was not necessarliy a problem. The person I was talking too said he needed to consult with his manager. They did a very quick credit check on me and within minutes said because of the 'good ' check they would be prepared to advance the amount we required.
It was really good to speak to a real human being and to be treated as an 'individual' and not just another number. In fact, every time I contacted First Direct I get though straightaway - no long convoluted telephone options before you get through to a real person.
The next step was to have a valuation on the house. For the amount I required the fee was £200. First Direct quickly arranged for the valuer to come and do a valuation.
The only disadvantage about the mortgage process was that there was some delay in the proceedings. This was because I live on an estate where there are communal areas that require upkeep. I am required to pay an annual maintenance fee to a Landscape Management Company. Before the monies could be released, First Direct had to receive a letter from the company. Unfortunately, the company took a long time to respond. Although First Direct kept contacting them by letter I personally felt that the whole process could have been speeded up by a direct telephone call to them. In this area they did not keep up to their slogan of 'Let's Keep It Moving'!
Despite starting the application process in January the mortgage only began in Mid May. My plan to pay off the amount added to the mortgage due to penalty charges will now take until December to clear as opposed to the end of September. However, I am very happy to have made the change as this product is no longer available at such rates. They will now only advance 75% of the LTV and the interest rate is now 2.89% (the Bank of England Base Rate plus 2.39% for the life of the loan).
I will try to explain in more detail the special features of first direct's 'offset' mortgage.
**Offset Mortgages**
The offset Base Rate tracker mortgage is a simple, straightforward offset Mortgage which must be repaid over a pre-agreed term and which tracks the Bank of England Base Rate for the duration of the loan. So if interest rates fall, so do your payments. Likewise, should they rise, your payments would increase. Your payments are not fixed as they are linked to the Bank of England Base Rate.
An administration closure fee of £149 is payable on closure of the mortgage. This fee is waived if you are transferring to another first direct mortgage product. With an offset Mortgage at First Direct you have to have or open a First Account with First Direct. You can link the mortgage to your current account and Savings Accounts. You then only pay interest on the difference. For example, if your outstanding mortgage value was £100,000 and you linked a savings account to this, which had a balance of £10,000, you would only pay interest on £90,000 of your mortgage.
In effect this means that because the accounts are linked you are using your 1st Account and day-to-day savings account balances to reduce the amount you owe on your mortgage. You do not earn credit interest on these accounts.
**Features of the Mortgage**
- Another feature of this offset mortgage is that you can also withdraw capital at any time, up to your agreed limit, which can be up to 75 - 80% of the value of your property.
- The daily interest on the mortgage is added up at the end of each month, and you are advised how much you owe at least 14 days before it is due.
- If you choose to make capital overpayments on your mortgage, you can take a break from them at any time and borrow back the capital you have previously paid (up to 80% of LTV). Say for example you wanted to carry out some home improvements you would not have to remortgage and have all the hassle and costs associated with that. The downside is that it is also way too 'easy' to get at that cash and you will have to be disciplined!
-If you move house, then the mortgage rate you enjoy with your first direct mortgage will also move with you - with no mortgage transfer fee to pay.
- With the First Direct mortgages, you are free to choose a monthly repayment date to suit your needs. If you move the monthly dates of your standing orders and direct debits that debit a linked 1st Account, to leave the money in your account as long as possible, you have a greater balance to offset against your mortgage. This helps to reduce the amount you owe, so you pay less interest.
**Eligibility**
To be eligible you need to:
agree a mortgage of at least £30,000
be aged 18 or over
open a first direct 1st Account if you do not already have one
use the mortgage for house purchase in England, Wales, Scotland or Northern Ireland for your own use, remortgage or for raising capital by releasing equity. First Direct do not lend for business purposes or buy to let.
The offset Mortgage must, in all cases, be in the same name(s) as the property ownership with a maximum of two people. Property ownership where three or more names appear on the register do not qualify for an offset Mortgage.
**Lending Criteria**
How much will First Direct lend? Currently, they will consider loans up to 75% of the value of the property depending on the amount borrowed and your personal circumstances. If your property is valued between £1 million and £1.5 million, they will lend a maximum of 65% of the value of your property. If your property is valued between £1.5 million and £2 million, they will advance a maximum of 60% of the value of your property. If your property is valued above £2 million, they will lend a maximum of 50% of the value of your property.
In making a decision on how much you can borrow the following criteria is used For a single application it is 3.5 times the gross annual salary. For a joint the formula is 3.5 times the higher gross annual salary plus 1.5 times the lower gross annual salary or 2.75 times the combined gross annual salaries. However, as in my case, First Direct do sometimes operate flexibility in this area. The offset Base Rate tracker Mortgage is not available to customers remortgaging from an existing first direct mortgage.
If you are looking to take out a mortgage or remortgage I would highly recommend that you take a look at First Direct's products. I really like the flexibility and the portability that First Direct offer with their offset mortgage and, most importantly, there are no blessed hefty redemption penalties with the offset mortgage!!
This review may be found on Dooyoo under the name of Kappari.
How helpful would this review be to a person making a buying decision? Rating guidelines
Advantages: Pay off mortgage early, save thousands in interest payments, low interest rate, tax-free savings Disadvantages: they can be a bit picky about who they'll take on
Advantages: Pay off mortgage early, save thousands in interest payments, low interest rate, tax-free savings Disadvantages: they can be a bit picky about who they'll take on
May 28th, 2009
exceptional by (32%):
very helpful by (68%):
