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M&S Bank launches mortgage range: how does it compare?

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Written by: Paloma Kubiak
26/01/2018
Marks and Spencer Bank has unveiled its mortgage offering for first-time buyers, movers and remortgagors, but how do its deals stack up?

The premium retailer with its banking arm has now entered the mortgage product market with fixed and tracker options for first-time buyers, home movers and remortgage customers.

Every mortgage purchased will result in a £25 donation to housing and homelessness charity, Shelter.

Here are the mortgage deals available:

First-time buyers

First-time buyers will receive £1,000 cashback, in addition to a free valuation. The product range includes two and five-year fixed rate deals, and a two-year tracker mortgage, from 60% to 90% loan to value (LTV), on terms of up to 30 years.

Sample rates include a two-year fixed rate, 90% LTV, 30-year term mortgage with a £995 fee. The cost to applicant including cashback is 2.09%.

A five-year fixed, fee saver, 90% LTV, 30-year term mortgage with no fees would come in at 2.62% including cashback.

A two-year tracker, 90% LTV, 30-year term with a £995 fee would stand at 1.99% including cashback.

It also unveiled details of a scheme to help up to four borrowers who will live in the property take out a mortgage together which could work for a group of friends or family members wanting to take their first step on the property ladder.

Remortgagors

The product range includes fixed and tracker options and customers remortgaging with M&S Bank will have the option to borrow more, at the same rate and term as the M&S Bank mortgage.

This would give them a lump sum, which could be gifted to someone to use towards a house deposit. M&S Bank confirms that customers remortgaging to it from another lender will receive fee assisted legal service which covers the cost of the standard legal work required to remortgage from another lender.

Sample rates include a two-year fixed rate, 80% LTV, 30-year term mortgage with a £995 fee which comes in at 1.69% (2.09% on the fee-saver option).

A five-year fixed, 60% LTV, 30-year term mortgage with no fees is 2.19% (1.99% on the fee option).

Home movers

The product range includes fixed and tracker options, including a two-year fix, 60% LTV, 30-year term at 2.09% on the fee-saver (1.69% on fee option).

A five-year fix, 70% LTV, 30-year term is set at 2.29% for the fee saver and 2.09% on the £995 fee option.

How do the mortgage deals compare?

M&S has upped its game in the financial market, having consistently ranked highly in best buy tables for personal loans, credit and customer service.

Andrew Hagger of Moneycomms analysed the rates and said M&S’s first foray into the market shows positive signs, and the deals are competitive.

“The bank’s two-year fixed rate 90% LTV first-time buyer mortgage ranks either first or second most competitive in the market across a range of mortgages up to £250k.

“If you look at a £180k mortgage (30-year term) for example, the net outlay with an M&S Bank 90% LTV two-year fix is £16,147 over the initial 24 months – that’s £692 cheaper than Barclays, £1,840 cheaper than NatWest and £2,920 less than Lloyds Bank.”

However, M&S slips down the table for competitiveness on properties requiring a £400,000 mortgage. Yorkshire Building Society has a rate of 1.82% with a £995 product fee and £250 cashback meaning a first-time buyer will pay £35,401, compared to M&S’ £35,923.

For those first-time buyers taking out the M&S two-year fix on 90% LTV, with £1,000 cashback, free valuation and no product fee, the rate is 2.49% with the total net outlay over the two-year period at £36,896. However, there are seven cheaper alternatives – the top being from Yorkshire Building Society with its 2.19% rate, £0 product fee, £250 cashback and free valuation. The outlay over the two-year period would be £36,134, according to Hagger’s calculations.

On the five-year fix for first-time buyers (90% LTV), with a £995 product fee, £1,000 cashback and free valuation, the total net outlay over the five years is £43,195, meaning M&S is in poll position, beating the likes of Virgin Money, Barclays and Metro Bank.

Hagger said: “The combination of a competitive rate, fee and a market leading £1,000 cashback will make M&S Bank a popular choice for those looking to buy their first home.

“It’s good to see some extra competition in the residential mortgage space from one of the UK’s biggest brand names – hopefully it will put pressure on other players to keep pricing low.

“As with similar forays into mortgages by supermarket banks, Tesco and Sainsbury’s, based on these initial products it looks as if M&S Bank will give established lenders something to think about.

“It’s still early days, but if these rates are a sign of things to come then it can only be positive for cost conscious borrowers.”

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