Mortgage Next is targeting first time homebuyers and people looking to remortgage their homes with the two-year fixed rate mortgage.
The mortgage has a fixed rate of 5.58 per cent for loans of up to 95 per cent of valuation for the first two years of the mortgage. After the fixed rate period it reverts to one per cent above the Bank of England base rate.
It also has a completion fee of £299 and redemption fees of five per cent of the advance for the first three years of the mortgage, along with an administration fee of £100.
Over the past three years the British housing market has seen a swing away from fixed rate mortgages to variable rate products. In 1998 55 per cent of the number of mortgages sold were fixed rate, with 45 per cent being variable rate. By 2000 this had changed to 34 per cent being fixed rate and 66 per cent being variable rate.
According to Moneyfacts on May 9, 2001 the Mortgage Next product is not the most competitive two-year fixed rate mortgage. The two-year fixed rate mortgage from Northern Rock is the most competitive, with a fixed rate of 3.45 per cent for loans of up to 90 per cent of valuation for the first two years of the loan. This has a completion fee of £495 and redemption penalties of 4 per cent of the advance for year one, 8 per cent for year two, 6 per cent for year three, 4 per cent for year four, 2 per cent for year five and 1 per cent for year six.