Coventry's 'Flexx for Term' advice

matthirst

I'm currently debating Coventry's 'Flexx for Term' mortage (1.79% variable for the full term), however, I originally assumed this would be tied to the BoE base rate as with lifetime trackers, but it appears it is simply a variable rate at their discretion, which is obviously concerning. The next cheapest lifetime tracker rate is with HSBC at 2.39% (1.89% + base rate), which is a fair bit higher, but you at least can rely on the rate moving forwards.

Does anyone have any experience/knowledge on this type of mortgage? Is it quite possible/realistic that they could just bump it up by 2% at any given point, irrelevant of any base rate changes, or is that very unlikely?

amnblog

This product is rate managed by the Lender, which means, as you rightly point out , it need not follow base rates.

We regularly use these and similar product and have not problem with them given:

There are no exit penalties should the lender fail to keep the rate competitive

The Lender may have up to 40% of it's book across these Flex and SVR products and cannot afford a max exodus of borrowers due to poor pricing

As you rightly say - similar tracker product are priced some 0.5% higher.

Thrugelmir

In essence it's a discounted variable rate that's currently open ended. The fact that it's open ended is primarily due to the complete uncertainty with regards to the future direction of money market interest rates. Base rate alone does not dictate the cost of money to lenders. So you should enter such an arrangement do so with your eyes wide open. Make the most of the low rates available and consider overpaying your mortgage for example.

matthirst

Is there any historical data of similar lifetime variable discount deals? Have they tended to 'pretty much' go along with the base rate? Or is it a fairly new type of offering with nothing to compare it against as yet?

Thanks for the advice here so far, definitely helping towards making a decision

amnblog

Historical data shows us base rates are a constant 0.5% - it does not really inform us.

matthirst

I meant when there were active base rate changes, eg in the 2000's; were similar lifetime variable discount packages such as this one changing more-or-less alongside the base rate also? Or did such packages not even exist then?

Thrugelmir

matthirst wrote: »

I meant when there were active base rate changes, eg in the 2000's; were similar lifetime variable discount packages such as this one changing more-or-less alongside the base rate also? Or did such packages not even exist then?

Only the board of the Coventry Building Society will know the rationale behind the product currently on offer. As a headline rate will gain much publicity and attract new customers to the society. The amount of funding available for these products maybe relatively small as well.

amnblog

My point was that in 2007 anyone predicting a 0.5 BOE base rate for even would one day would have been considered insane.


The mortgage market tells us previous experience is of little value in predicting the future.

Daniel54

matthirst wrote: »

I meant when there were active base rate changes, eg in the 2000's; were similar lifetime variable discount packages such as this one changing more-or-less alongside the base rate also? Or did such packages not even exist then?

I had a CBS Flexx mortgage which I took out in 2006.Certainly,when the Base Rate came down,then so did the Flexx mortgage rate

I haven't read any reports of CBS raising or lowering the rates on these mortgages other than in response to the BOE base rate

chappers

But as Thruglemir said previously the BOE base rate is not necessarily, and most likely not, how the lender has assessed the rate and criteria for this product, so may have no bearing upon how the rate will change in the future.
Financial decisions at that level aren't made upon historical data but upon future predictions, what worked last week, month, year or whenever has no bearing on what may happen in the future.
But as amnblog says it all depends upon the banks exposure and whether they could afford a mass exodus should the rate become uncompetitive.
If the product is truly flexible and there are no penalties for early redemption then at least you have the option to bail out if things aren't heading in a direction you are happy with.