Coventry Building Society launches pragmatic solution

The Coventry Building Society has today announced a surprisingly pragmatic solution to some customers reaching the end of their current mortgage deal. The new scheme offers 100% mortgages to existing customers who find themselves in negative equity. Whilst there has been much comment surrounding the Northern Rock Together mortgage, it is less widely known that some other lenders offered almost identical schemes, including the Coventry. It is primarily these customers which the new scheme is aimed at.

The new deal is a five year fixed rate of 4.99% with no arrangement fee and no booking fee. In comparison with some of the five year fixed rates currently on offer, this has to be seen as a good deal, especially in the current economic climate. The alternative for most borrowers would be to revert to the standard variable rate of 4.74% currently being offered by the Coventry, but whilst this might be slightly cheaper at present, it does not offer any certainty at all with regards to the future.

Many of those who had chosen the Coventry 125% scheme would have received advice and chosen a fixed rate, many of which would have been higher than the current offering. Despite the oft expressed view of the likes of Vince Cable, Liberal Democrat Shadow Chancellor of the Exchequer, such schemes were not irresponsible lending. In fact, it can be argued that this type of mortgage was perhaps one of the more responsible ways to lend prior to the credit crunch. Applicants for both the Coventry and Northern Rock offerings were very strictly assessed, and only the most worthy applicants were accepted. Applicants without an established employment history, or who had missed a payment or two on other credit commitments were simply declined at outset. To get the highest income multiples, applicant had to choose a long term fixed rate which ensured that the mortgage remained affordable for a number of years. This new scheme allows this principle of prudent lending to continue to customers who wish to lock in affordability in a way which is simply not possible with a variable rate.

In addition to the schemes which were available from the Coventry and Northern Rock, there were similar offerings from Abbey, BM Solutions and Mortgage Express. It is hoped that following this move, some of the other lenders will consider following the example set by the Coventry, and offer pragmatic solutions to existing customers coming to the end of their current deal. The announcement today perhaps provides some justification for the Coventry strap line of TLC not PLC.

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