Sainsbury’s Bank has launched a range of mortgages for first-time buyers, those who need to borrow up to the age of 70 and the self-employed.
Rates start from 1.34 per cent and offer flexible repayment terms – including early repayment options, payment holidays if you need to take a month off the mortgage and the ability to pay a reduced amount some months.
Loans are available up to a maximum of 90 per cent loan-to-value, meaning those with just 10 per cent equity or deposit can purchase and remortgage up to a maximum loan of £500,000.
The deals also come with an added shopper reward for supermarket customers, letting them earn up to £200 a year in vouchers towards their shopping for two years.
Catherine More, head of mortgages at Sainsbury’s Bank said: ‘Mortgages and grocery shopping are some of our customers’ biggest household expenditures.
‘We’ve built our new mortgages in response to our customers’ needs, they told us they wanted to feel supported through the whole process, that they wanted the flexibility to pick the advice that suits them, and to receive a good deal.’
HOW THIS IS MONEY CAN HELP
Borrowers can apply directly to the bank or get independent mortgage advice through mortgage broker firm London & Country or any broker signed up to Legal & General’s mortgage club.
David Hollingworth, of L&C Mortgages, said: ‘We welcome more competition in the mortgage market and particularly from those entrants that have put real customers at the heart of their design.’
How does Sainsbury’s compare to the competition?
EARN MONEY BACK ON YOUR WEEKLY SHOP
Apply for a mortgage by 26 February 2018
Use your Nectar card when you shop at Sainsbury’s
Earn a reward of up to £400 worth of vouchers over two years
To qualify, you need to earn a minimum of £5 worth of vouchers in each quarter. So your qualifying spend needs to be at least £100 in the quarter to earn the minimum £5 reward
Excludes anything you spend in a Sainsbury’s petrol station
Excludes anything you don’t earn Nectar points on
Four times a year Sainsbury’s will send you vouchers to spend in its stores (but not online)
Sainsbury’s will allow you to spread your repayments over a maximum of 40 years – which could bring down your monthly commitments significantly.
Be aware though, the longer you take to repay your mortgage, the more interest you’ll incur and the more expensive the overall deal will be.
The bank has also said it is keen to lend to older borrowers, and as such will lend up to the borrower’s 76th birthday. This is a higher maximum age than some mainstream banks which only go up to age 75 – but there are plenty of smaller building societies that will lend up to age 80 or 85 in some cases.
The deals allow overpayments on your mortgage of up to 10 per cent of the outstanding balance each year.
If you’ve made overpayments over a few months, you can apply to make underpayments or to miss a monthly payment altogether in a later month.
For borrowers with a 25 per cent deposit or equity, a two-year fixed rate deal starts at 1.34 per cent with a £995 fee.
On a £150,000 mortgage over a 25-year term, monthly repayments would be £588.69. Over the two-year period, this equates to a cost of £15,123.65 including the fee.
A fee-free option is priced at 1.74 per cent over two years, incurring monthly payments of £616.97 and a slightly cheaper overall cost of £14,807.19 over the two year deal period.
Yorkshire Building Society offers a cheaper rate than Sainsbury’s – at 1.16 per cent with a £1,700 fee – this equates to monthly repayments of £576.24 and an overall cost of £15,529.74 over two years.
For borrowers with a 10 per cent deposit or equity, a two-year fixed rate starts at 2.09 per cent with a £995 fee, monthly repayments of £642.37 and an overall cost of £16,411.98 over two years.
A five-year fixed rate with a 10 per cent deposit has a rate of 2.89 per cent and a £995 fee. Monthly repayments on the same mortgage as above would be £702.76.
The Sainsbury’s deals might not be the cheapest available today but they do offer the added incentive of money off grocery shopping.
Andrew Hagger, of Moneycomms, said: ‘It is good to see a provider entering the mortgage market with such a competitively priced range of products across the full range of LTVs.
‘The added bonus of a shopper reward is an innovative move that makes the deal even more appealing for Sainsbury’s shoppers – the option to earn up to £400 vouchers off shopping over two years is not to be sniffed at.’
Before you commit to a lender based on incentives such as rewards schemes or cash back offers, always think about how much you can afford to repay each month and whether a higher rate means you end up paying more over time than you get ‘back’ through the reward offer.