Abbey has been accused of creating a huge payment shock for borrowers after launching a stepped-rate deal that starts at 2.99 per cent for the first year.
After one year, the five-year mortgage offer shoots up to 6.2 per cent for two years and climbs again in years four and five to 6.35 per cent. It has an application fee of 799.
Abbey says the product will be aimed at FTBs and borrowers returning to the property market who need some breathing space in the first year.
Hamptons Mortgages director Jonathan Cornell says the deal creates a steep payment shock and it is not competitive. He believes that Nationwide’s five-year product at 5.34 per cent offers better value.
Cornell says: “There is a huge payment shock as the rate will more than double in 12 months. I am not sure how many people will need this mortgage.”
Abbey spokesman David Stewart says: “We are transparent about the rate as people are made aware from the start that it will inflate. There will be people out there looking for this type of mortgage.”