Exclusive Connections has designed a four-year stepped discounted-rate mortgage for all borrowers, including the self-employed and first-time buyers.
The mortgage is available for loans of up to 95 per cent of valuation and there is no arrangement fee. It offers a 2.5 per cent discount in the first year which gives a current payable rate of 4.09 per cent. The discount is reduced to 0.75 per cent in years two and three, then a 0.5 per cent discount is offered in year four.
Borrowers who pay off the mortgage during the discount period must pay an early redemption penalty of six months' interest at the standard variable rate (SVR).
According to Moneyfacts on September 24, 2001, the most competitive mortgage of this type is from Alliance & Leicester. It is also available for loans of up to 95 per cent of valuation and has a 3 per cent discount in the first year, giving a payable rate of 3.74 per cent. A 2 per cent discount is offered in year two, followed by a 1 per cent discount in year three and a 0.5 discount in year four.
Compared to the Exclusive Connections deal, the Alliance & Leicester mortgage is more competitive during the first three years, but less competitive in year four. It imposes the same early redemption penalty as Exclusive Connections, but its SVR is higher. This means borrowers who pay off a £75,000 mortgage must currently pay £2,527.50 with Alliance and Leicester and £2,471.25 with Exclusive Connections.
Both mortgages offer a £250 cashback, but those remortgaging with Exclusive Connections are offered free legal fees instead, providing in-house solicitors are used. However, Alliance & Leicester offers free valuation for house purchases in addition to the cashback, which Exclusive Connections does not provide.